Marks & Spencer, Sainsbury's and Tesco - not the first places you think of to invest your savings. However, according to a survey by MORI Financial Services, 20% of all new savings accounts in the last 12 months were opened with supermarkets. Now these superbrands are trying to repeat their success stories in the mortgage, pension fund, insurance and, perhaps eventually, electricity supply sectors - but are they really doing consumers a favour?
The prevailing view is that greater competition yields immediate benefits for the consumer. 'Well-respected and trusted brands can eliminate uncertainty and confusion,' says Phil Telford, senior policy researcher at The Consumers' Association. The 'reassurance' factor of a brand is highly prized in any sector that engenders deep mistrust among consumers, he says. The potential for superbrands to muscle in is huge. Over 2.5 million customers are unhappy with their banks, a recent survey for Abbey National revealed.
More tangibly, the superbrands are able to offer more competitive interest rates - due to lower operating costs - and more user-friendly opening hours. 'New players in dull, old markets shake things up,' according to Matthew Kingdon, a partner of What If, the research and product development firm. Just as First Direct's 24-hour telephone service introduced the notion of direct banking to the sector, the friendly retail values of, say, a Sainsbury's or Tesco should, in the same way, help to shed the stuffy, unapproachable image of banks, he says. Banks are already being forced to pay more reasonable interest on accounts, to drop fees on authorised overdrafts or to make their branches look more like shops.
Yet trusting too unquestioningly in a superbrand isn't without its drawbacks.
Consumers shouldn't just blindly go by the brand name but should stop and consider the actual product on offer.
'The consumer should be aware of any product's limitations. Will the low interest rates being offered today change in a year's time?' asks Brian Capon, information manager at the British Bankers Association.
By straying off their traditional path, superbrands may also be grappling with new ways of operating and that could unnerve consumers. 'Grocery retailers always say yes to the consumer but, in the financial sector, you sometimes have to say no,' explains Tim Westall, director of strategic marketing consultancy New Solution. 'The real test will come when Sainsbury's is forced to repossess its first house,' suggests Jim Spowart, managing director of Standard Life bank, which is competing head-to-head with the supermarkets for savings accounts. 'How will consumers react then?'
The biggest drawback for customers is if a trusted brand suddenly decides to abandon a new market. 'It's very well for brands to dabble and experiment but what if they don't get consumer interest and the business isn't as profitable as they thought? Who will the brand sell the business to? Consumers could be left stranded,' says Elsa Harrod, consultant at Investor Intelligence, an independent financial adviser.
It will be impossible to measure the effect of the new entrants into the financial sector for some time. 'The superbrands' foray into financial services has only been five minutes long,' says Telford. 'In five years' time, will the new players still be around or will they get cold feet?'.