Safeway raises card war stakes

Supermarket competition in financial services was stepped up yesterday when Safeway launched a new interest-paying plastic card account in partnership with Abbey National.

The announcement came as Sainsbury's confirmed that it had received authorisation from the Bank of England to operate its planned joint venture with Bank of Scotland. Sainsbury's Bank, which will be launched before the end of March, will be 55 per cent-owned by the supermarket group.

Safeway has stuck closer to the concept used by Tesco with its Club card, by putting its brand name on a card operated by an existing bank, rather than setting up its own bank.

Safeway said it hoped its ABC bonus account card would attract new customers and buy the loyalty of existing ones.

Ian Mumby, director of business development at Britain's third-largest supermarket group, denied that Safeway was following a trend to move into financial services.

"I think we're doing something quite different from what our competitors are doing. So I would say we're not following, we're leading," he said.

The Safeway account offers 5 per cent pre-tax interest on balances of up to pounds 600. Customers will be able to use the card at Safeway and any of the 70,000 stores that accept Visa's Electron on-line debit card.

Cardholders will also collect points when shopping at Safeway, with extra points during the first 12 weeks the account is open.

The cards can be used to withdraw cash from Abbey National's machines and 20,000 others, and customers will have access to a 24-hour telephone banking service.

Safeway said a range of other financial services would follow, which could include a current account with an overdraft and a credit card.

Safeway is working with Abbey towards providing banking within its stores, and other financial services such as personal loans and household insurance.