TESCO Bank has today launched its long-awaited current account which it hopes will help retain customer loyalty in Tesco's supermarket wars as well as supporting further growth for the bank in Scotland.
First heralded five years ago, the account arrives in a more crowded market with recent launches from the likes of M & S Bank and TSB, and in the wake of figures showing a third successive sales fall for Tesco stores.
Its key attractions are 3 per cent credit interest on balances up to £3,000, loyalty points on its debit card, an 'overdraft control', and deposit facilities at 300 stores.
Tesco Bank says it canvassed the views of 20,000 customers in designing the account.
Chief executive Benny Higgins said the account's gestation had been affected by developments such as the new switching service and customer demand for digital banking on mobile and tablet.
However, he was confident that the timing of the launch was not an issue. "We are doing this for generations, this is not a current account for Christmas this is for the long-term," he said.
Tesco Bank had "a different kind of culture" from mainstream banks, Mr Higgins said.
"We don't pay any less than 0.75 per cent on savings on any of the accounts, whereas recently Which? said customers are losing up to £4.3billion by being in 'zombie bank accounts'.
"We have also given customers over £0.5 billion of Clubcard points in value, and as soon as we could we took away incentives on sales targets (for staff)."
Mr Higgins went on: "The vast majority of customers are very poorly served by banks who offer headline-grabbing rates to try to get new customers but continue to neglect existing ones - 80 per cent of accounts in the UK pay zero per cent interest and less than one in 20 pay more than 0.5 per cent."
Customers will have to pay in at least £750 each month into the account to avoid a £5 a month fee.
However, the fee will be waived for Tesco's 300,000 staff, as the bank looks to build up a solid block of early switchers.
The bank says a £220 overdraft for three days will cost 34p which compares favourably with the £6.34 charged at some banks
Meanwhile, its overseas debit card charge will be a competitive 2.75 per cent.
On the value of the initiative to Tesco in its present battles, Mr Higgins said the account was not intended as a loss leader.
"There is no smoke and mirrors with this, it is very competitively priced, but it is commercially sensible too... . We will have very strong retention levels and it will make the relationship between Tesco and its customers a much stronger relationship."
Mr Higgins said the deposit facilities at 300 stores, with 90 per cent of the population "within a half-hour drive", was a recognition of the need for a multi-channel capability, but customers were now used to digital shopping with 98 per cent going online.
According to Mr Higgins, Tesco Bank, which has lifted accounts from 5.8 million to seven million since buying out Royal Bank of Scotland in 2008, did not have a target for market share but he noted its uplift in UK credit card transaction share from eight per cent to 12 per cent.
Philip Clarke, Tesco's chief executive who confirmed last week he was "not going anywhere" but would lead the company's fightback, said its customers wanted "quality products they can trust, providing great service, making things simple and transparent and rewarding them for their loyalty".
Andrew Hagger, analyst at Moneycomms.co.uk, said: "Increased banking activity in 2014 means customers now have a wider choice of current account options and those looking for long term rewards and credit interest returns will no doubt be attracted to the Tesco Bank proposition."
Tesco Bank has created 300 new jobs this year with a further 300 in the pipeline.
Its 4,000 staff include 2,000 in Glasgow and 1,300 in Edinburgh.