Attention to retail is key, says Tesco Bank’s Peter Bole CA
Peter Bole CA talks to Robert Outram about his role as CFO of Tesco Bank and the benefits of applying retail principles to banking.
Only around six per cent of British consumers switched their bank current accounts last year.
For Peter Bole CA, CFO with Tesco Bank, one of the leading "challengers" in the retail banking sector, that's both a problem and an opportunity.
It's a problem because consumer inertia, based on the perceived difficulty both of comparing current account offerings, and of switching, creates barriers for a relatively new entrant like Tesco Bank.
It's an opportunity because, if consumers started looking at their bank accounts the way they look at car insurance – which saw 29 per cent of consumers switching last year – that creates an enormous potential market for any provider that can offer a better deal than the established players.
What Tesco brings is the experience of the retailer and the desire to serve customers very well and very effectively.
From joint venture to wholly owned
Tesco Bank started out in 1997 as a 50/50 joint venture between Tesco, the UK's largest supermarket retailer, and The Royal Bank of Scotland. Tesco bought its partner out in 2008 and the Edinburgh-based bank is now wholly owned by its parent. Peter Bole had been involved with the sale on the RBS side, as director of finance, partnerships, international and commercial with RBS Insurance, which was providing products for the joint venture. He moved across to take up the role of CFO at Tesco Bank, reporting to chief executive Benny Higgins.
He says that being wholly owned "allows us to have greater clarity – we have a single stakeholder and clearer, cleaner lines of communication."
For Peter Bole, being part of a retail group contributes to the culture of the bank. He explains: "Retailers know how to react to the needs and demands of customers. They are incredibly customer-led businesses. Because the longevity of a buying decision in retail is quite short, if people don't like what they get, they won't shop there next week.
"Financial services companies have historically traded on the opposite type of customer behaviour, which is inertia. Customers can be slow to act even if the service they are getting is not great.
"So I think what Tesco brings is the experience of the retailer and the desire to serve customers very well and very effectively. It's a mindset shift."
Tesco Bank in numbers
- 7.6m customer accounts
- 1997 opened for business
- 2008 becomes wholly owned by Tesco plc
- £6.9bn in saving deposits
- 4,200 staff in Edinburgh, Glasgow and Newcastle
Source: Tesco Bank
One of the first tasks for Peter Bole and his team was to help organise the migration of the bank's products and customers to new platforms. Tesco had had a half share in the joint venture, but in terms of operations, risk management, credit assessment and a host of other activities the bank had been serviced by RBS. Tesco Bank had to ensure the smooth migration of 600,000 savings customers and 320,000 loans customers, not to mention three million credit card customers and more than a million motor insurance policies.
Peter recalls: "The migration programme was at points all-consuming, yet we were continuing to trade the business through it. And we were doing it at a time when the world was being turned upside-down by the credit crisis. There's a huge sense of achievement at the bank at that."
Through all that the bank continued to grow. Since the buy-out from RBS loan balances are up 57 per cent, credit card balances up 71 per cent, ATM transactions up 32 per cent and the bank has launched mortgages, with around £1.2bn of mortgage balances today. More recently (in June 2014), Tesco introduced its own current account. In 2014/15 the bank's revenue was £1.024bn and trading profit was £194m.
So is it a case of "job done"?
Peter says: "I don't think anyone here would feel like that. There is still inertia in the financial services market, in no small part because of the lack of transparency around financial products."
'Greater transparency in financial services'
Tesco is the first bank to display "foregone interest" on current accounts – that is, spelling out what the customer could gain by switching to another of the bank's accounts, like a savings account.
A study carried out by Tesco Bank, "Current account switching", found that 37 per cent of consumers felt it was "quite difficult" to compare different current account offerings, and 5 per cent said it was "very difficult". Overdraft fees and charges, and credit interest rates, were seen as important factors but hard to compare.
Tesco Bank's argument is that greater transparency and clarity in financial services would enable customers to make better decisions and feel more confident about doing so. It's much the same idea as the printout in your local supermarket that tells you how much cheaper or more expensive your shop was compared with what you would have paid at a competitor's store.
[Being a CA] gives you a strong foundation, a strong technical skill set. Working in the profession exposes you to a wide variety of businesses, and you learn a huge amount through that.
But while Tesco is targeting the High Street banks' personal customers, is the retailing giant also looking to expand into new territory, for example small business lending, or overseas markets?
Peter says this isn't the plan: "We have the core products, the question is how you grow them and improve the propositions within the core product set. For us it's about how you refine them rather than entering completely new markets. Tesco is fundamentally a retail business, serving the consumer in the UK and that's where we have our strength."
Peter Bole's career as a CA began with Scott-Moncrieff in Edinburgh, where he qualified before moving to work in corporate finance with Deloitte. He says the profession was "a fantastic learning ground" but he soon decided that he preferred the idea of working in industry and commerce.
As he puts it: "For me, it was about being in a business where you feel you can make a difference."
From Deloitte he moved to Standard Life's private equity arm, where, he says: "It was great fun but it didn't satisfy my desire to be at the coalface of running a business."
That came when he moved to RBS, initially in corporate finance once more but then in a line management role, in what was the bank's insurance business, including Direct Line. It was a move that ultimately led to his current position.
Peter says of his CA training: "It gives you a strong foundation, a strong technical skill set. Working in the profession exposes you to a wide variety of businesses, and you learn a huge amount through that."
He continues to engage with ICAS, including taking part in the ICAS Foundation's mentoring programme and, hopefully, in the near future, gaining authorisation for Tesco Bank to take on trainees under the TOPP (Training Outside Public Practice) scheme.
Peter says: "It's a pretty good working environment here and people do feel the bank has the right values, the right motives. We just carried out an audit of our 'culture' and the feedback was that colleagues throughout the organisations are very clear about the importance of doing the right thing. That's attractive to me and to colleagues more widely."