Coles Money banking on savings accounts
Australian Super market giant Coles is allegedly in the process of seeking a formal banking licence from the Australian Prudential Regulation Authority (APRA) that would allow it to launch a savings account under it's own name rather than in partnership with a bank.
The move coincides the supermarket's success in trademarking 'Coles Money' in and the termination of its 20year agreement with GE Capital in 2015, when Coles would then have the option to buy out its partner.
If the licence is granted it would be held by the Coles parent company Wesfarmers, under a non-operating holding company structure.
If confirmed, this news would put the supermarket group and its parent company in direct competition with Australia's major banks and allow the household brand to offer its 18 million customers savings accounts and mortgages in addition to the Insurance products already offered.
The company's major Australian competitor Woolworths also offers financial products under the brand of Woolworths Everyday Money, including insurance and credit cards.
Australian supermarket groups are following a global trend of moving into the provision of services such as telecoms and financial products, in addition to retailing goods and groceries. The trend is already well advanced in the United Kingdom and USA where supermarkets have played a large role in the financial services space for more than fifteen years.
If their experience is any guide as to the success possible with Coles, the big four will have some real competition on their hands. In the UK, Tesco currently claims 7% of credit cards and 5% of car insurance a market share that Australian supermarkets are no doubt looking to replicate and improve upon.
Coles is understood to have already sold over 200,000 insurance policies but breaking into the mortgage and savings account market is a difficult task. New challengers in the financial services market with trusted brands and competitive products will be a welcome thing for consumers, but the key for the supermarkets will be finding ways to motivate new clientele to "switch" from their current providers.
If Coles current insurance products are anything to go by Coles money will bring some fierce competition to the market. Coles have already won an award for their financial products in the 2013 Mozo People's Choice Awards for best value insurer, so the market will be watching the launch of any new financial products with close interest.