Author Mark Richards
Tesco Bank has cancelled the credit cards of some Tesco bank customers in the run-up to Christmas. The Bank says it is a fraud prevention measure: the customers are understandably angry. Were Tesco right to do it? Or was it just another blow to the beleaguered banking sector?
The first time it happened to me I was in a sports shop. I had my daughter with me: she was around 13 and I was buying her a pair of trainers. “I’m sorry, sir,” the shop assistant said to me. “Your card has been declined.”
And as they always do when they say those words, he said it in front of a queue of people.
Fortunately, I had some cash in my pocket: my daughter got her trainers. And I got a dose of very public humiliation.
As soon as we were home I phoned the bank. “We detected some unusual spending patterns,” their call centre said. “You’d bought Lego, gin and football boots within thirty minutes. Now you were trying to buy girl’s trainers. It didn’t fit your demographic profile.”
I pointed out – as politely as I could – that on December 17th my demographic profile was a married man with three children buying Christmas presents.
“Oh,” they said – and restored my card to its former glory.
That was ten years ago, and ‘profiling’ has moved on since then. But once bitten, twice shy. And if I am going to spend a lot on my card – or if I’m going abroad – I phone the bank and let them know.
It looks like I got off lightly…
But in comparison to some Tesco bank customers, it looks like I got off lightly. Unhappy customers are complaining that they have had their credit cards cancelled by Tesco, as part of the Bank’s ‘fraud prevention measures.’
No-one is underestimating the scale of financial fraud in the UK – last year it reportedly topped £20m a day – or the importance of dealing with it. And Tesco says that the cards in question have been stopped as a ‘precautionary measure’ and that all affected customers will have their cards re-issued by the end of this week.
Not surprisingly, Tesco’s customers are not happy about their cards being cancelled and were quick to take to social media to vent their frustration.
I got a text message yesterday telling me that my card had been cancelled and a new one would arrive in 7 to 10 days. A friend of mine had the same and that was the only way I knew it wasn’t just me.
As you might expect, Tesco bank quickly wheeled out the proverbial ‘spokesman’ to give the company’s response:
“We take the security of our customers’ accounts very seriously and take every possible measure to protect customers from fraud. As a result of industry-wide fraud protection measures we are re-issuing a number of cards.”
So that’s alright then. A few Tesco bank customers will be hoping their cards arrive in time and adding ‘last-minute Christmas shopping’ to their to-do lists.
But is it alright?
Clearly, the affected Tesco bank customers will have suffered some anxiety and – if they tried to use their card after it was cancelled – the same embarrassment that I did. What the issue does highlight is the fine line that needs to be drawn between fraud prevention and customers having confidence in their cards: the knowledge that – assuming you are within your limits – your card will be honoured after you have tapped in the four digits of your pet’s birthday.
There is also an issue for the banks. As we wrote recently, every aspect of their business is under threat. Their disappearance from the high street seems a matter of ‘when’ not ‘if.’
Should customers share their bank information?
Historically, customers have been very protective of their financial details. But all that could be about to change. Customers of nine of the UK’s biggest banks have received letters and e-mails in recent weeks informing them that their personal information can be shared with other firms – if they give their permission.
Inevitably, most people’s reaction to this is, ‘No! If I share my information I’ll be bombarded with junk mail, texts and e-mails.’ But according to the Competition and Markets Authority (CMA) adopting this so-called ‘open banking’ could lead many people to get much better deals on products such as online loans and overdrafts. The CMA maintains that financial data is owned by the customer, not by the banks, and the customer should be able to use it for their own benefit.
But many people are sceptical, pointing out that only 3% of personal customers move their bank account each year: as the old cliché has it, more people are faithful to their bank than to their partner. Traditionally, we have been more likely to get divorced than to switch banks.
But it’s not about the banks
Remember my daughter? The one who was with me when my card was declined? She is 22 now, recently graduated and working in her first job. She has a whole life of financial products ahead of her: savings, pensions, mortgages, life cover, providing for her children’s future when she has them and – ultimately – dealing with any pathetically small inheritance we may leave her. In short, she is exactly the type of customer the banks want: the sort of customer they should be fighting to attract and retain.
The problem is that she – like all of her generation – is moving inexorably away from the banks. “Do you use Apple Pay?” I asked her the last time she was home.
She sighed and looked at me. “Dad. Everyone uses Apple Pay.” (You will not be surprised to hear that I scuttled off to Google to check exactly what it was…)
Social media and mobile payments are taking on the banks: we may still be a long way behind countries like Japan in mobile technology or Sweden in moving towards a cashless economy – but we are going in that direction, and the tide will not be reversed.
My daughter will at some stage need all the products I outlined above. But she will access all of them on a mobile device, and she will be quite happy when artificial intelligence makes a decision on her mortgage and her life cover. She will see absolutely no need to make an inconvenient appointment with a ‘customer advisor’ incentivised to sell her products she does not need.
In the short term Tesco may have upset a few customers in the run-up to Christmas: in the long term, it is just another nail in the coffin of the traditional banking sector.