The integration of supermarkets into personal finance has been quite methodical. Tesco’s first foray into the sector came 13 years ago, with operations originally focussed on insurance. But that has now changed and, along with the emergence of Sainsbury’s Finance and Marks & Spencer Money, there can be little doubt that the supermarkets are here to stay.

Image: Chris would need help reaching the credit cards.

Should the traditional lenders be worried? Well, what the supermarkets increasingly have in their advantage is that consumers consider convenience to be uppermost in their list of priorities when dealing with their finances. With millions coming through their doors on a weekly basis, the appeal of combining grocery shopping with topping up an ISA or applying for a loan is clear.

It surely beats having to rush down to your provider on a lunch break or having to travel to a branch that opens on a Saturday, which could be miles away if you live in a rural location. The vast amount of retail space, already enjoying a huge footfall, means the supermarkets have been able to dodge significant outlay which other new entrants to the personal finance sector will inevitably encounter.

Furthermore, massive profits should also ensure that the supermarkets are easily able to satisfy the Financial Service’s Authority new liquidity requirements, which have been drawn up to protect savers’ funds, making sure that providers could cope with a mass withdrawal of deposits.

All that being said, providers live and die by the quality of their products. To this end, supermarket lenders have started to catch the eye in recent weeks, climbing in a number of the Best Buy charts on Moneyfacts.co.uk.

For a loan of £5,000 to be paid back over the course of three years, Sainsbury’s Finance has a typical APR of 8.8% (equating to monthly repayments of £157.75 and a total of £5,679) – the best on the market. Tesco Bank follows with 8.9% APR (as does Alliance & Leicester). While the 12.9% APR from Marks & Spencer Money is not quite as competitive, it is still one of the best six rates available.

Loans of £10,000 over a five year period tell a similar tale, with Sainsbury’s Finance offering the lowest APR of 7.9% and Tesco Bank close behind at 8.2%. The closest provider is Alliance & Leicester at 8.9%.

The table showing Best Buy 0% purchase credit cards also makes for interesting reading as the supermarkets take positions one, two and three. Tesco Bank offers 0% on purchases for 12 months, while Sainsbury’s Finance and Marks & Spencer Money follow with ten months

Admittedly, these are exceptions rather than the rule, and traditional banks and building societies still make up the majority of the tables on this website. But these product launches, alongside Tesco Bank firmly parking its tanks on the lawns of estate agents by offering to sell homes for a flat fee of £999, are proof that the supermarkets are serious about their personal finance operations.

Let’s hope increased competition benefits the consumer.

James Henderson, Reporter, Moneyfacts Group