Supermarkets well placed to compete with banks

by Gill Montia

Story link: Supermarkets well placed to compete with banks

Defaqto is convinced that supermarkets such as Tesco could be in a strong position to compete with High Street banks, once existing personal finance offerings are expanded to include current accounts.

In a report entitled Retail Banking: Challenging Times, the financial analysts suggests that brand recognition leaves supermarkets well placed to enter into the full banking service market.

The report’s author, David Black, comments: “Supermarkets generally enjoy impressive customer image, brand recognition and the trust of their customers. This coupled with the fact that a member of just about every household has to physically visit a grocery store or its internet site, at least once a week cements the potential attraction.”

Mr Black adds that a further incentive could be the ability of supermarkets to cross-subsidise as the UK moves into a period when banks will have to charge fees for current accounts.

For example, a retailer could offer free full-service current accounts to customers who spend a certain amount in-store each month, effectively locking-in customers to buy the majority of their groceries with the supermarket, while at the same time encouraging people to open a current account.

Tesco Personal Finance already has plans to open bank branches in 30 stores by the end of this year; the retailer expects to launch a current account in 2010 and possibly expand into mortgages in the years ahead.

Meanwhile, Boots recently revealed that it is considering a move into personal finance as it seeks new areas of business that will increase sales across its 2,600 UK retail outlets.