Supermarket banking is set to become a “real force in financial services”, a report from Sainsbury's Bank has revealed.
Compiled by IBM Business Consulting Service, the report shows that with supermarket banks already having around 5.8 million customers, this figure could rise to 14.43 million by 2008. This would be an increase of 149% over the next five years.
However, IBM warns that for supermarket banks to realise their full potential, they need to provide a more customer focussed and interactive proposition in the stores themselves.
This could mean providing more face-to-face advice for customers in stores or facilities to deposit cash into savings accounts.
The report also said that they need to develop a better insight into their customers and use this to differentiate their propositions, especially in the area of customer service and convenience.
The report identifies three main strengths strong of supermarket banks. These were the retailer's brands, their low operational costs resulting in high competitive products, and strong access to a large customer base.
Ewan Puckle Hobbs, managing consultant at IBM Business Consulting Services, says: “Supermarket banks already have a significant share in the retail financial services market and the potential is there for them to grow dramatically and become a real force in the industry.”
And Derek Bottom, deputy chief executive at Sainsbury's Bank, says: “In 1997, J Sainsbury's was the first to offer a supermarket banking proposition. It now has 1.7 million customers and its business is growing rapidly.
“The latest published financial results show that when comparing the first six months of 2002 with 2001, it saw its customer's acquisitions grow by 90%, insurance sales increase by 63% and its personal loans book double in size. There is no reason why Sainsbury's cannot continue with this rapid expansion.”