MUSGRAVES, the retail giant behind SuperValu, Super- quinn and Centra, is plotting a sensational entry into the bombed-out banking sector by creating a potential "third force" in banking.
Well-placed sources have told the Sunday Independent that Musgraves has been examining plans to utilise its near 680 SuperValu, Super- quinn and Centra stores around the country as a ready-made distribution network for a wide range of financial products, ranging from debit cards, loans, insurance and credit cards.
Sources close to the company described the plans as "in their infancy". The retailer is recruiting a number of key executives to "help shape the plans", according to a source.
Musgraves is considering launching its banking business in late summer 2014. The company has not yet decided whether it will be a joint venture with another financial services group or another bank in order to provide further products.
It is thought that Musgraves will be able to tailor financial products to its customers through extensive use of its "Real rewards" loyalty card scheme, which contains valuable insights into customer spending patterns and habits. Equally important is that customers will be able to clock up large numbers of reward points by using the retailer's banking products.
A move by Musgraves into the malfunctioning banking system will strengthen the growth of the so-called "shadow banking" sector.
With high street banks curtailing lending to customers and businesses, other niche financial companies have been ramping up their offerings to Irish customers. This has seen an increase in "pay day" lenders and other specialist financial firms.
Musgraves should be able to compete strongly on price as it does not face the pressures of the banks, which need to ratchet up customer fees in order to cleanse their balance sheets and return to profitability.
Large supermarkets and retailers have moved into the banking sector before. In the UK, Sainsburys set up a joint venture with Lloyds Bank to provide a range of banking services in 1997. Sainsburys bought out its partners last May. The bank offers its customers a range of financial products including insurance, credit cards, pre-paid foreign exchange debit cards, savings and loans.
A key part of Sainsburys Bank's strategy is to give customers nectar points for using its financial services. Sainsburys offers double points on its shopping for up to two years for customers buying certain financial products.
Tesco has also dipped its toe into financial services, with its Irish operations offering credit cards and insurance products underwritten by RSA. Tesco's UK operations provide a far wider range of banking services including mortgages, fixed-rate personal loans of up to €30,000 and savings accounts.
Retailing legend Feargal Quinn also tried to enter the Irish banking sector at the end of the 1990s when setting up Tusa, a joint venture between his Superquinn supermarket chain and Permanent TSB.
However, after two years, the innovative banking group had attracted just 10,000 customers and had written less than 500 mortgages. As losses spiralled, the Tusa business was shuttered in 2001.
Ireland's high street retail banking sector is far less competitive than it was in the late 1990s. Danske Bank is planning to exit the retail bank market, following on from the departures of ACC and Bank of Scotland (Ireland). Irish Nationwide and Anglo Irish Bank have imploded with EBS being absorbed into AIB.
Close to one in four bank branches have closed or are earmarked for closure as the big four retrench in a bid to rebuild shattered balance sheets.
This has led to AIB and Danske inking deals with An Post to use its branch network for some customer services.