A foray into offering banking solutions is a convenient way for Coles to find out more information about its customers and how they spend their money. A data collection solution perhaps.
Having a change in government, banks and depositors alike would be eager to know if the bank deposit levy will still be implemented.
Either way, Wesfarmers brand Coles looks set to challenge Australia’s banks, with reports it is seeking a formal banking licence from the regulator, the Australian Prudential Regulation Authority (APRA).
As a group, Wesfarmers is established in offering financial products, already providing car and home insurance. In addition, credit cards are offered through their affiliation with GE Capital Finance. Adding a banking licence will continue to diversify the suite of financial products, but it will fall well short of a one-stop shop for all your financial needs.
Internationally, British supermarket chain Tesco has a similar offering under the Tesco Bank brand. Since splitting from a partnership with Royal Bank of Scotland in 2008, it has been able to continue developing its banking brand. Today, it has over 6.6 million customer accounts and policies.
Tesco Bank contributed a tidy 5.5 per cent of group trading profits in the latest financial year, as well as a 13 per cent increase in trading profit.
Coles hasn’t confirmed its application for a banking licence but it would make sense to follow a similar strategy to Tesco, which has brought about years of success. The Tesco group endeavours to deliver good value, while rewarding loyalty for shopping at Tesco. At least it’s honest about the entwined relationship between the supermarkets and banking offering.
With a primary footprint across the UK and Asia, Tesco has a total of 36 million loyalty scheme members. That’s a lot of people to be collecting information from.
Through the reward program Flybuys, Coles is already able to collect a substantial amount of information about customers. Adding additional banking options puts them in a prime position to gather more information than ever before.
An extra market player could lower costs across bank products for everyone. But what is the cost you are willing pay, directly or indirectly, to give one company endless information about your spending?
Although Wesfarmers is a conglomerate with a tendency to seek new business opportunities, the strategic response from supermarket operator arch rival Woolworths will be telling. If the strategy is wildly successful for Wesfarmers, you can’t help but think Woolworths shareholders will feel they have missed out if they don’t follow suit.