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A new report by Professor Merlin Stone of Bristol Business School calls for the UK’s supermarkets to play an even bigger role in helping to bridge the UK’s savings gap. The report claims that the best way to get people to save money is through providing them with new convenient distribution channels. The report claims that supermarkets could help to fill the void left by the closure of around 4,000 local bank branches over the past 10 years, leaving around 1,000 inner city and rural communities without a local branch.
In a drive to make saving more accessible and convenient to its customers, Sainsbury’s Bank is currently rolling out SaveBack into 514 stores. SaveBack is an innovative new service that allows people to deposit money into a savings account through simply swiping their debit card at the supermarket checkout. The bank also offers a facility whereby people can save into two of its savings accounts by handing their savings to a member of staff at a designated deposit area in the supermarket. Alternatively, they can simply post their cheque in a secure quick deposit point in the store.
The Bristol Business School report, which was commissioned by Sainsbury’s Bank, states that some 7.25 million people hold financial services products from supermarket banks and have £5 billion deposited in supermarket savings accounts. With most UK adults visiting one of the four leading supermarkets each week, the report sees the local supermarket store as taking on an important new role in encouraging regular and convenient saving. If all supermarkets banks were to extend their in-store savings channels to the checkout, at the point of transaction, the amount of money transferred into savings accounts could double to over £10 billion deposited within a year.
Professor Stone believes that people will accept supermarkets in this role because half the household budget is spent with them and an estimated 15% of adults already hold a financial services product with them. Supermarkets can also offer unrivalled convenience, enabling people to deposit money into savings accounts whilst they do their weekly shop.
Professor Stone said: “There is a real opportunity for supermarkets to help revive people’s saving habits. While banks have continued to close branches and restrict opening hours, supermarkets have gone the other way, extending their opening hours and increasing their coverage, in and out of town.
“The UKhas one of the lowest ratios of bank branches per head of population in Western Europeand supermarkets could help address this situation and, in doing so, make a positive contribution to closing the country’s savings gap.”
Jonathan Hewitt, Business Development Director at Sainsbury’s Bank said: “The report confirms that people are happy to do their banking with supermarkets, and the number of supermarket banking customers is growing at a rapid rate. With the average person now spending almost £2,500 each year on groceries, the equivalent of half the household shopping budget, we agree wholeheartedly that we can play a much bigger role in getting people to save more regularly.”
The report claims supermarkets have a number of characteristics that put them in a strong position to get Britain saving:
1. The strength of their brands
Supermarkets have very strong and trusted brands with a large number of loyal customers. In many cases supermarket brands are stronger than those of traditional financial services companies and this level of trust can be used to encourage people to start saving more.
2. Ease of extending appeal
Supermarkets have demonstrated time and again that they can move from their core business of groceries to other product lines. Customers are used to being offered new products, including financial services, from them. Many people already use savings products and other financial services form supermarkets.
3. Access to a large customer base
Supermarkets have access to large customer bases, which they can use to target people to encourage them to save more.
4. Low operational costs that result in highly competitive products
The operational costs of supermarket banks are believed to be around 25% of those of an average financial services company. This saving can be passed on to customers in the form of more competitive products and services. Sainsbury’s Bank savings accounts are among the most competitive in the marketplace paying as much as 5% gross AER on deposits of £1.
5. Supermarkets’ reputation for consistently focusing on customer needs
Supermarkets are among the best organisations for focusing on the needs of customers. Customers have confidence in supermarket pledges to deliver consistently competitive savings rates.
Professor Stone said: “Urgent action is needed to address the growing savings gap. As well as looking to develop new consumer-friendly products, the government and financial services industry also needs to review distribution channels and find ways to make it easier for people to save. Supermarkets have a number of positive characteristics that could be used to help achieve this.”
Jonathan Hewitt said: “We want to play a leading role in getting Britain to start saving again. Not only have we developed a range of attractive savings products, we have also extended our promise to pay above average rates until at least 2010. Greater convenience and a promise to be fair and offer consistently attractive returns hold the key to closing the savings gap. We hope that other supermarkets and companies offering savings products will rise to this challenge.”
Tuesday, March 01, 2005
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