Progressive hits back at Foodstuffs' 'bank'

By Nick Smith

Friday 15th November 2002

Progressive Enterprises is retaliating to rival Foodstuffs' new grocery banking venture by trialing its own financial service in the South Island.

Foodstuffs and Australia's fifth-largest bank, St George, announced the joint venture would start early next year with an internet and phone banking service.

With a name for the banking venture to be announced, the two companies plan to eventually unroll a full range of financial services, including credit card, mortgage and insurance facilities.

Foodstuffs' move is intended to consolidate its position as the dominant supermarket chain, putting pressure on Progressive to match its move into financial services.

It will also put the squeeze on minnow banking operations such as the taxpayer-funded Kiwibank, operated in a crowded and highly competitive market.

While denying Progressive's trial was a tit-for-tat reaction, managing director Ted van Arkel said the company was experimenting by accepting Farmers card at its South Island Woolworths stores, a trial starting early next year.

Farmers is a wholly owned subsidiary of Progressive, and the trial would last several months before making a decision whether to allow card use elsewhere. Progressive had examined introducing a financial services operation several years ago and would be keeping an eye on Foodstuffs' initiative.

Foodstuffs (Auckland) managing director Tony Carter said its banking operation would be based on successful UK operations such as Tesco.

Although the new bank would inevitably cannibalise competitors' customers, Mr Carter said the venture was intended as adding value to its supermarket business.

There would not be separate banking facilities at its New World, Pak 'N Save, Four Square and Write Price stores, with customers making deposits, withdrawals and account transfers at the checkout counter, he said.

These services would be available within a year but would not lead to bigger queues, he said.

Eventually a full range would be offered, including credit card, mortgage and insurance facilities, he said.

St George managing director and chief executive Gail Kelly said it was only entering the New Zealand market because of the unique opportunity presented by Foodstuffs.

The bank, which competes primarily in New South Wales and ACT, has assets of $55 billion and 2.6 million customers.

Mrs Kelly said head office for the bank would be based in Wellington and employ about 20 people, with the possibility of more hiring as the need arose.

The venture was "low cost and low risk" with all profit and expense shared 50:50 between the two companies, she said.

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