The face of personal finance is changing following the market meltdown that started in late 2007 and still continues today. New entrants, clean of the toxic debt that has caused so many issues for major financial institutions, have emerged and are keen to take advantage of the current demand for credit.
One relatively new entrant is Sainsburys Finance, a trading style for Sainsburys Bank Ltd, a joint venture with Lloyds Banking Group. Although they started actively promoting the financial services operation in 1997, they have recently expanded their offering and introduced a whole new range of products in an attempt to gain market share.
One such offering is on their personal loans. As a new customer, you can take out a new personal unsecured loan and earn double Nectar points for two years on all spend in their stores. If you apply for more products, such as their credit card and use this to pay for your shopping then it is possible to earn quadruple points for two years. So on a typical family spend of £120 per week, it is possible to earn nearly 50,000 points over two years. If you take out four products (such as a loan, savings account, credit card and insurance) then you can earn almost 125,000 points.
But this doesn't mean that you will be paying over the odds for their products. As a low cost provider, their products are fairly priced and many appear in the 'Best Buy' tables published by comparison websites and newspapers. Amongst the top rated offers are pet insurance, over 70s car insurance and buildings and contents insurance for those living in high risk regions. Their 0% offer on credit card purchases also rates amongst the best in the market as do their personal loans and instant access savings products. All their offers come with restrictions and conditions so make sure to read the small print before you apply to make sure you understand what conditions apply.
The major expansion of their activity has focused on savings and loan products. During the first three months of the car scrappage programme, they saw a 37% increase in lending on personal loans to fund new car buys. With the programme recently extended by the government by another £100m on top of the original £300m, they see personal loans as a key opportunity. They have recently introduced a low rate unsecured loan to try and tap into this market by offering instant credit decisions and no repayments for the first 3 months (although interest will accrue to the loan during this period). Their current charge rate is 8% APR on a £7,500 loan (the typical amount borrowed to buy a new vehicle) which compares favourably with other offers from major providers. The monthly payment over a typical 48 month repayment term is £184.64.
Sainsburys is also majoring its marketing effort on promoting its credit card. It has recently extended its 0% interest free period on purchases from three months to ten months and has reduced its charge rate from 16.9% to 15.9% whilst other lenders are increasing their rates. The current Nectar points offer also equates to a 2% cashback equivalent on a typical £3,000 annual spend.
Their pledge on rates holds true for their savings products too. They are one of a few banks offering a rate guarantee on new accounts by currently awarding a 2% bonus over the Bank of England Base Rate for twelve months after account opening.
With award winning products in many of the financial services products, Sainsburys Finance is set to be a force for the coming months and years. Other high street stores are also expanding their financial services offerings in an attempt to gain market share and increase revenue and customer loyalty. Tesco and M&S are the other two major retailers pushing hard to expand their financial services businesses.
Sainsburys has around 18 million shopping visitors per week and already have 1.5 million customers and deposits of over £3.5billion. They offer limited banking services through stores at the moment but this is set to increase in coming years. This is a serious business opportunity which they will be sure to capitalise on.
Such an expansion is good for consumers at a time when competition in the market place was waning from the major banks. This may herald the start of a financial services revolution as these low cost, service oriented suppliers seek to redefine the standard in a battered industry.