Finance, flights and food too: forget the express checkout

Selling everything bar pensions, supermarkets are going deep into financial services, but do their deals make a difference?
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The Independent Online

Want to sell your home? Visit Asda. Remortgaging? Give Tesco a bell.

Why not, then, insure your home contents with Sainsbury's, buy new furniture with a Morrisons credit card and pay your salary into a Co-op bank account? And after all that, treat yourself to a bargain break by popping into Lidl to get more than two-thirds off the price of a £69 flight to Vienna.

Supermarket shelves are already well stocked with financial products; soon they will be positively groaning. As they struggle to win new customers, foster loyalty and gain market share, a number of high- street names are pushing into new areas in financial services or revamping their existing reward schemes.

Most eye-catching was last week's effort by the Co-op to relaunch the "divi", the longstanding profits payout scheme it ditched in the 1970s in favour of fixed-price stamps and then loyalty cards.

The redesigned, 21st-century divi will reward shoppers in cash for purchases made across a range of services. Say, over a typical year, you spent £10 a week in your local Co-op supermarket, bought a £1,000 holiday from the Co-op travel agent and had a mortgage of at least £50,000 with the Co-op Bank.

Depending on the company's profitability but assuming a value of 1p per point, this would work out at roughly £5.20 for a year's shopping, £10 for the holiday and £25 for the home loan. That might not sound much but it could prove an incentive for regular customers - and, in particular, for those who use the Co-op's financial services arm.

As well as points for the mortgage, up to 500 points are available separately for home and car insurance. There's also one point for the following held at either the Co-op Bank or its online division, Smile: every £5 of loan debt, every £10 in a savings account and every £5 held or borrowed in a current account or on a credit card.

The Co-op's chief executive, Martin Beaumont, said last week that the company "would not rely on the blind loyalty of our members". The new divi, though, will definitely help to ensure this.

The Co-op is not the only retailer to develop the financial services on offer at its checkouts in an attempt to win new custom. Asda began to roll out its national estate agency service three weeks ago. Its 1 per cent flat-rate commission fee compares well with the usual 1.5 to 3 per cent, and could save consumers thousands of pounds on even the cheapest property sale.

If Asda's move is successful, it's almost certain that it will be copied by its two main rivals, Tesco and J Sainsbury, both of which are already thought to be interested. This could have a huge impact on the whole UK property market, driving down commission rates.

Elsewhere, the cut-price chain Lidl has announced that it will be selling - for one week starting on Tuesday - cheap flights to Germany or Austria with the low-cost carrier Air Berlin at its 390 UK stores. The retailer hopes to generate new customers by offering vouchers for £19 that can be swapped for flights to the value of £69.

As supermarkets penetrate further into our personal finances - chiefly thanks to their huge buying power in tie-ups with large insurers - the only major product they have yet to repackage is the personal pension.

"Somebody will have a go in a couple of years, and I'd probably bank on Tesco," says Andrew Haggers of financial analyst Moneyfacts.

Although the UK's No 1 supermarket - accounting for £1 in every £8 spent on the high street - currently has no plans to launch its own-brand pensions, few would disagree that it's capable of doing so.

The impact of the major supermarkets on our finances can be felt nearly everywhere. Their success has stemmed from offering the basics: simple life cover from £6 a month; credit cards that levy 0 per cent interest on new purchases and balance transfers; and internet savings accounts paying 4.75 per cent.

Supermarkets began their assault on the sector five years ago, and have been helped by the rise of websites such as Money-supermarket.com which allow users to compare the cost of financial products.

Even now, after the big lenders have had enough time to adjust and hit back, consumers will still find decent deals at the checkout - particularly on insurance, says Stuart Glendinning of Moneysupermarket.com.

"And as well as price, it's invention," he adds. "For example, Tesco's low-cost 'value' car insurance will - if you are prepared to accept a £475 excess and fewer repair guarantees - lop a fifth off the usual price."

And when it comes to credit cards, Sainsbury's plastic is proving one of Moneyfacts' best-performing products - currently the second-most generous card on the market.

However, Mike Naylor of the consumer body Which? says that while supermarkets did shake up the market, good value is now harder to come by: "They're just a part of the mix and, more often than not, they are not the most competitive."

Like banks before them, supermarkets are benefiting from our inertia.

"Because customers trust that brand, they will stay with [the supermarket for financial products], although you can be pretty sure that it won't be the best deal," says Mr Naylor. "People are very trusting with big brands, and supermarkets are tapping into that."

He warns that deals can change, for better or worse, from month to month.

Supermarkets' push into its territory has prompted a particularly fierce fightback from one part of the financial services industry.

Earlier this year, the insurance broker Lifesearch gained the support of 57 MPs for an early-day motion that raised concern over the sale of life and critical illness cover without professional advice.

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