Banking without the banks

The financial crisis and the subsequent distrust of the existing banks have created an opportunity for new competitors to enter the market for financial services. Organisations from outside banking could use their trusted brands, their stronger grasp of information technology and their stronger customer service ethos to potentially shake‐up the provision of financial services and hence to take business away from the “traditional” players. This paper aims to examine the potential for these “non‐banks” to enter and expand into the UK financial services sector and to analyse their prospects, before finally reflecting on how big a challenge they face in entering this market.

The paper is based on a report entitled “Tesco Bank and Virgin money: prospects for banking without the banks” released in 2010, which offers an analysis of the UK market and of the main potential entrants. It presents a much abridged version of the report and has also been revised to provide a more international relevance.

The paper discusses the strengths and weaknesses of the two main potential entrants, Tesco Bank and Virgin Money, and draws conclusions based on some of the challenges that they will face in seeking to enter this market.

The paper is very relevant, given the publicly espoused aspirations of both Tesco Bank and Virgin Money to enter the market for financial services in the UK. It may also have lessons for other new entrants in other countries.