According to a report prepared by IBM Business Consulting Services on behalf of Sainsbury's Bank, (Supermarket banking - fulfilling the potential) UK retailers have the opportunity to steal more business from tradtional firms because of their strong brands, lower operational costs and large customer bases. However, it suggests retailers will have to adjust their business models to provide more face-to-face advice for customers in stores or facilities to deposit cash into savings acccounts if they are to fulfill their true potential.

Derek Bottom, deputy chief executive, Sainsbury's Bank says: "Our latest published financial results show that when comparing the first six months of 2002 with 2001, we saw our customer acquisitions grow by 90%, insurance sales increase by 63% and our personal loans book double in size. There is no reason why we cannot continue with our rapid expansion."

With operational costs around 25% of those of an average financial services company, retailers can pass on savings to customers in the form of competitive products and services. For example, according to market research company Direct Excellence, the cost of car insurance from Sainsbury's Bank and Tesco is around 11% below the average for the market as a whole.

If the non-banks can tap into their vast volumes of customer data to offer more precisely targeted financial services products - and develop a more obvious physical presence in the supermarkets themselves - they stand to make great gains, suggests the report.

Ewan Puckle Hobbs, management consultant, IBM Business Consulting, comments: "The supermarket could become a major distribution channel for retail financial services products. It may be too soon to say that we are seeing a revolution in the way that banking services are delivered – but where better to ferment a consumer revolution than in the haven of consumerism – the supermarket."