Woolworths launches credit card

National retail chain Woolworths will launch its own branded credit card next month in a move designed to carve out a position in the Australian financial services sector.

National retail chain Woolworths will launch its own branded credit card next month in a move designed to carve out a position in the Australian financial services sector.

From 1 September the company will offer the “Woolworths Everyday Money Credit Card”, with a linked reward program for products purchased across the group’s retail outlets.

The credit card is the retailer’s first general application financial product and its success will be seen as an early test of the company’s new financial services division.

The company believes its high-profile brand and large customer base provide a strong springboard for its leap into the new business sector.

Card users will be able to earn points on transactions and redeem these points for shopping vouchers that can be used at Woolworths and Safeway supermarkets, liquor stores, Big W, Dick Smith and Tandy.

“Our wide-reaching customer base is the ideal target market for the credit card as we already transact with them every day. We process more than 114 million credit card transactions through our checkouts each year,” chief executive Michael Luscombe says.

While the Woolworths credit card will be the first general purpose credit card offered by a supermarket in Australia – David Jones plans to launch its own card before Christmas – it is a business model that has proved successful overseas.

Martin North, managing director of Fujitsu Consulting and an authority on the credit card industry, says Woolworths shouldn’t have a problem extending its brand to financial services.

“There are many retailers, like Tesco in the UK, that have had a successful foray into financial services,” North says. “They need to clear in their own mind on what the value proposition they are offering is, but Tesco showed there is no problem with brand and Woolworth’s brand is relatively well known and perceived.”

Credit demand in Australia has come down from recent record levels, but North says strong demand remains in some parts of the economy – particularly among families in some degree of financial distress – for additional credit.

“There is no doubt there is room for retailers in financial services, so expect to see more companies make the move in the future,” he says.

Woolworths is partnering with MasterCard and HSBC to provide the credit card. Details of the rewards program and interest rates attached to the card have not yet been revealed.

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