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Supermarket giant Coles has confirmed its move into financial services, which has added to industry speculation it could ultimately move into the mortgage market.
Coles has announced its intention to form a joint venture with GE Capital Australia that – if approved by regulators – would see the two combine to offer credit cards and personal finance products to customers. However, it should be stressed the announcement made no mention that a mortgage offering was on the horizon.
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The plan is for the unnamed business to be operating by 2015 and to target existing Coles customers. Roy Morgan Research from February this year showed that Coles had 8.8 million customers and one-third of the $111 billion annual grocery market.
In a statement announcing the joint venture, Coles said that the partnership would “deliver innovative financial services to the Australian market… with the additional value and benefits of Flybuys’ award-winning loyalty program, including money off your groceries at Coles.”
Coles’ existing 400,000 MasterCard customer accounts will also form part of the new joint venture, representing close to $800 million in credit card receivables.
“A joint venture is a logical next step for Coles to expand into financial services, building on the success of Coles No Annual Fee and Rewards credit cards,” Coles finance director Rob Scott said of the partnership with GE Capital.
Rachel Cobb, managing director of consumer finance for GE Capital Australia and New Zealand, said, “GE is delighted to expand its longstanding relationship with Coles to build a long-term partnership that will leverage the capabilities of both organisations and will create innovation in the market with a strong growth potential.”
Since 2010, Coles has launched a range of insurance products including motor, home and life insurance; however, these will remain outside the scope of the joint venture.
Interestingly, the announcement of Coles’ foray into financial planning coincides with the release of the interim report of the Financial Services Inquiry, which showed 42 per cent of Australians had never used a financial planner.
