The Australian Financial Review (AFR) has reported that leading retailer Woolworths Limited (ASX: WOW) has lodged an application for the trademark 'Woolworths Money.'
The news comes just weeks after Wesfarmers Ltd (ASX: WES) formed a joint venture with GE Capital as part of a plan to expand its financial services offering to Coles' customers.
According to the AFR the Woolworths Money brand will be rolled out across products ranging from, "deposit taking, personal loans, residential mortgages and even superannuation and retirement funds."
Given the experience in the UK supermarket industry and the strategic moves by both Coles and Woolworths here in Australia, it would appear almost certain that it's only a matter of time before both retailers apply for banking licenses.
This is a huge risk for Australia's domestic banks and their legacy technology platforms. As fund manager Platinum Asset Management Limited (ASX: PTM) discussed recently in an article titled Virtual Banks, new entrants are at a distinct advantage to incumbent banks. This is because of new technologies which allow them to disrupt the status quo with low capital start-up costs. If Platinum has picked this trend correctly, Woolworths and Wesfarmers could be major winners thanks to the cross-selling opportunities of their customer bases and their large marketing budgets.
The end of banking as we know it
While Woolworths and Wesfarmers won't overtake the major banks in terms of scale any time soon! They do have the potential to gain ground incrementally. This alone could mean the best days for bank shareholders have now passed.
