Would you take out a Woolworths Money Home Loan?
It looks like home loans could be coming to a supermarket shelf near you very soon.
Woolworths have reportedly secured a number of trademarks under the ‘Woolworths Money’ brand. This is the strongest signal yet that the supermarket chain is going to follow the footsteps of Coles into the financial services space. The rival grocery retailer has applied for a banking licence with APRA to write loans and take deposits.
Woolworths announced this year that their range of Woolworths Money Everyday Credit Cards is getting an overhaul. The Money Everyday spread of products will be migrated over to the Woolworths Money brand in coming months. Woolworths Money General Manager, Dhun Karai said, “Visa will work closely with Woolworths Money to migrate the existing credit card portfolio from MasterCard and HSBC later this year.”
Accounts, loans, cards, insurance and planning
If predictions from industry commentators are correct, Woolworths is likely to offer a range of different financial products and services. As well as credit cards, we could see personal loans, savings and transaction accounts, home loans, insurance and financial planning from Woolworths. There are a number of opportunities for Australia’s largest retailer if they become a registered deposit taking institution. A competitively priced fixed and variable mortgage may strike a chord with budget conscious borrowers. And industry commentators believe Woolworths could rattle the big four banks by capturing some of the Australian savings market — a valuable source of funding for Australian lenders.
Woolworths are following Coles. Coles are following Tesco
Woolworths and Coles are copying the moves of Tesco, an English supermarket chain, and one of the world’s largest retailers. Tesco can deliver savings on products like car insurance by tailoring premiums based on the information it collects about customer’s spending habits. But some experts have raised concerns about one company controlling so much data about Australian consumers. For example, if a Woolworth’s shopper was pregnant and applying for a home loan. Perhaps from her purchasing habits, a company like Woolworths could conclude that her life expenses will increase in the next 6 - 12 months and factor this into their decision to grant her home loan or not.
But there have been positive reactions from industry commentators as well. A competitive market means better deals for Australians. And the practice of incentivising consumer data collection is nothing new. Qantas released an internet browser add-on that earns Qantas Points, and tracks the user’s search patterns. Presumably to on-sell the information to another company, or for internal use. However, the scheme was generally well received by frequent flyer enthusiasts. The concept could have interesting applications for a company that is able to offer credit to purchase the goods and the goods themselves.
Will a Woolworths home loan be worth it?
There are a lot of online and bricks and mortar home loan lenders, and thousands of products for Australians to choose from. Woolworths would need to offer a market leading product (at least to begin with) to make Australians take notice.
The Woolworths brand is so strongly associated with food, it may be difficult for some to make the leap to feeling comfortable about trusting the supermarket with something like a home loan. But, if Woolworths stick to their word and keep prices, “Down. Down.” Why wouldn’t you get a home loan from Woolworths if it was going to save you thousands?
Our prediction about Woolworths Money Home Loans
At this point in time, it’s only possible to speculate on the type of home loans Woolworths may offer. Woolworths credit and prepaid cards have a lean towards offering rewards with the Woolworths loyalty program; while Woolworths has positioned its insurance products as low cost. Hopefully Woolworths extend this budget and features stance to their home loan and deposit taking business. You could see a range of no frills home loans or you could see a mixture of fixed and variable loans with and without frills. The distribution system could be interesting too. Imagine a Woolworths Money branch where you could do your banking adjacent to their supermarket and liquor store. However, the trend is towards online banking. This is where consumers can get the best deals. It’s likely that any future products from Woolworths will be backed up with smartphone and tablet applications for easy application and management of loan and accounts.