The wires are alive today with news that supermarket giant Coles, owned by Wesfarmers Ltd (ASX: WES) has taken another step towards plans to expand its financial services offering to customers.
The news should come as no surprise to investors. As I highlighted here just two weeks ago, a move by Coles and its rival Woolworths Limited (ASX: WOW) into financial services is a logical progression of their customer offering.
According to the official media release, Coles has formed a joint venture (JV) with US-based GE Capital to initially offer credit cards and personal loans. Interestingly, the JV is focussed on leveraging new payments technologies including the 'Coles Mobile Wallet'- these innovations are bound to entice tech savvy and younger customers to make the switch. It's a clever move as it positions the product to succeed with the customers most open to switching from their entrenched banking provider.
Having begun offering financial services such as insurance to customers in 2010, it appears Wesfarmers' management is now ready to ramp-up the offering especially post the sale of its insurance underwriting business to Insurance Australia Group Limited (ASX: IAG) which has significantly increased the group's balance sheet firepower.
Although neither Wesfarmers nor Woolworths has yet applied for a banking license which would allow the companies to accept deposits from customers, it's probably only a matter of time. Even without the banking license however, the scope to shift from the personal loans space into the mortgage arena could be a serious threat to all Aussie banks given their mortgage products are described as their "rivers of gold".
