Trusted brands try to take advantage of the bank bloodbath

11th July 2012

Keen to take advantage of their brand equity, Asda is the latest supermarket to announce plans to rebrand its financial services arm Asda Money and launch a new credit card.

But it has been more than a decade since shoppers have been able to put an insurance plan in their shopping basket alongside their groceries – although this market is heating up as banking scandals are motivating customers to leave the big banks behind and find alternatives.

As Zoe Williams writes in the Guardian, by Tuesday last week Nationwide had reported an 85% week-on-week rise in its online applications for new accounts, while the Co-op had a 25% increase.

"It is the people who have the power to change banks, not the politicians and certainly not the regulators," said Bruce Davis, who co-founded Zopa. "It's more than a consumer choice, it is a democratic one. It is about moving the power of money away from those who take it for granted."

So with our trust in banks at a low ebb it appears that supermarkets and retailers have upped the ante in their bid to win customers over. After all, trust is key.

As Ken Eisold, Mindful Money's pschoanalyst blogger, says: "Most of us view trust as valuable and desirable, something that improves the quality of our personal lives. We seldom take the next step and view it as indispensable, a vital ingredient in society – and in the economy. But all credit is based on trust, and the fundamental problem in a credit crisis is not just the lack of "liquidity" but also the absence of trust, the trust that is essential to all financial transactions.

"British Historian Geoffrey Hosking noted recently: "A liberal, free market society needs ‘trust in the trustworthy' as the core of its values, not just as a Quixotic moral ‘extra'."  (See, "Trust: Money, Markets and Society.") 

Tesco, Marks & Spencer and Sainsbury's have already come up with their own alternative banking models.

Only last month, M&S revealed that it was to open an in-branch banking service in its Marble Arch flagship store in London, and a further 50 across the country in the next two years. Tesco said that it would soon be offering mortgages and has plans to offer current accounts in 2013.

So what's the catch?

It's that most supermarkets simply lend their name to products supplied by the banks – so is the model really any different? Aren't they simply taking advantage of the war talk that is being propagated in relation to high street banks?

As customer faith in banks hits rock bottom, the rush to provide an alternative is to be expected, but don't supermarkets and retailers risk being dragged down too?

After all, look under the bonnet and most supermarkets have actually teamed up with those very same lenders to offer current accounts, insurance and credit cards – just under a different name.

Transparency is key – and supermarkets make a token attempt

Asda has teamed up with a number of financial service providers to offer travel money,  breakdown cover, travel and car insurance and home insurance.

Meanwhile, Sainsbury's set up Sainsbury's Bank in 1997 in a joint venture with Lloyds Banking group, and Marks & Spencer has a profit-sharing partnership with HSBC.

However, Tesco can shine its halo by truly adopting a different model, as it bought out its joint venture partner Royal Bank of Scotland, and is going it alone.

But it's key to remember that behind brand equity is a simple truth based on whether the consumer feels respected or exploited. And financial services providers are typically seen as homogeneous in what they offer –  a focus on profits.

Of course, customers are looking for alternatives, with organisations dedicated to persuading people to move their money. And if corporate customers finally tire of being duped, there may be a real challenge to the business model of big banking. 

Yet consumers' expectations of the major supermarkets are a great deal higher than for the banks. So while this is an opportunity for trusted brands, it could also be their potential downfall by damaging customer expectations when they realise what's under the bonnet of the new banking products.


More Mindful Money

Through a corruption glass darkly

Barclays: time for ethics not regulation

Has Tesco had its time?

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