Sainsbury’s latest retailer to commit to banking with branches planned

Sainsbury’s plans to open bank branches in some stores as it expands further into financial services

Sainsbury’s is planning to open bank branches in some of its stores as it approaches the completion of its core banking system roll-out.

According to finance website This is Money, the addition of branches could be part of the retailer's expansion into financial services.

In 2013, Sainsbury's began a three-and-a-half year project to move its banking customers off the systems of Lloyds Banking Group and onto an off-the-shelf banking system from FIS. 

This followed the supermarket's £248m acquisition of Lloyds’ 50% shareholding. Once fully rolled out, Sainsbury’s Bank’s core banking platform will enable it to widen digital services and support the bank’s expansion.

Competitor Tesco is also looking to expand in this sector. It launched a current account in June 2014, four years after implementing its core banking platform, and CEO Benny Higgins recently said growth of current accounts was planned. Tesco’s core banking system is also off-the-shelf, from Fiserv.

Sainsbury’s and Tesco are part of a new breed of financial services firms from non-banking backgrounds. One of the perceived advantages of these new banks is IT. Traditional banks have legacy systems that date back to the 1970s in some cases, which were not designed to work in today’s banking environment, where technology has changed.

Because Sainsbury’s already has a large network of stores, adding bank branches within them will require less capital investment. 

Future banks will have far fewer branches and will rely on technology more and more. The UK’s major high street banks are reducing their branch networks by hundreds, with Royal Bank of Scotland and the Co-operative Bank among them. 

The Co-operative Bank is closing about a quarter of its remaining branches, replacing them with digital technology. It will close 57 branches as part of its cost-cutting plans, leaving it with 165 – about one branch per 8,500 customers – but aims to retain service levels through IT. The bank said it bank is focused on responding to the changes in the way customers are choosing to bank. 

Meanwhile, RBS will close another 99 branches.

Traditional banks, with their high costs and legacy systems, are being challenged by new banks using technology as a differentiator.

But Sainsbury’s and Tesco banks are not immune to IT problems. 

In January, Sainsbury's Bank experienced IT problems that left customers unable to use their credit cards for a day. Customer cards were declined at checkouts and customers were advised to contact the bank. 

Earlier in February, a technical problem during a routine update of back-office files prevented some customers at Tesco Bank from being able to view online accounts for two days.

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