Retail giant hints at mortgage expansion plans

An Australian retail giant with almost 20 million customer transactions a week talks about expanding into the mortgage market



Retail giant Coles is looking to expand its financial services by entering the $1.2 trillion mortgage market in the near future.

The major supermarket chain – which currently offers credit cards and home and motor insurance – has outlined opportunities for Australian retailers to extend financial services offerings in its submission to the Financial Systems Inquiry.

The paper, submitted by finance director Rob Scott, concludes the Australian retail market is not as developed as overseas markets, where consumer brands – such as UK retailer Tesco in the United Kingdom and President’s Choice in Canada – offer mortgages to customers.

“Tesco, for example, has now commenced offering mortgages after gaining regulatory approval from the UK Prudential Regulatory Authority.”

But Coles blames Australia’s unnecessarily complex regulatory environment for holding competition back by failing to accommodate new entrants and innovations.

“The international experience in offshore jurisdictions provides several key lessons for Australia’s policy settings,” Coles said.

“First, the regulatory regimes in offshore jurisdictions have appropriately allowed for non-financial conglomerate groups to expand into the banking market by largely relying on their existing licensing regimes.

“Importantly, the regulatory approach in other jurisdictions has been to treat the bank on a stand-alone basis.

“There is no international precedent that sees a prudential regulator extend its supervisory reach by applying banking prudential requirements to the non-banking entities of a retail group that holds a banking licence.”

The retail giant said certain requirements needed to provide credit, in the National Credit Act and supporting regulations, have not kept pace with changes in the market or the use of modern delivery channels.

Coles also suggested the ACL and AFSL regimes are reviewed, to help reduce unnecessary compliance costs for participants and allow new entrants to compete more efficiently.

The business operates more than 2,300 retail outlets across Coles and BiLo supermarkets, First Choice Liquor, Liquorland, Vintage Cellars and Coles Express.

It processes almost 20 millions customer transactions a week. 

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