For once we're going to blame a British company for starting the ball rolling. The Co-operative Group has more the six million members and employs more than 123,000 people. It began 165 years ago and now offers a full range of products and services from groceries to funerals to legal services and banking. In a sense, this organization believes it should compete with for-profit companies and win market share by offering better value to its customers. It offers a complete range of insurance and investment products and services to all its members and customers who walk in off the street. More recently, Tesco (the company that has now admitted failing to break into the American market with its Fresh & Easy stores) has joined in and also offers everything from auto, life, home insurance, to banking, loans, credit cards, investment products, and so on. With shops in every town and city across Britain, both these retailers offer significant competition to conventional insurance companies, banks and financial advisors. Now we're beginning to see the same thing in America.
If you go into a Costco, you can walk down one aisle and pick up basics like bread, milk and eggs. In the next aisle you can pick out the best home insurance package or decide to investigate whether a home equity refinance deal works well for you with the prevailing low interest rates. Major retailers like Costo, Home Depot, Sam's Club, and Walmart are moving beyond the simple store card and offering an increasingly wide range of different financial products and services. Why should this be? The answer is an interesting reflection on one of the byproducts of the wealth divide. If we look at the average middle and upper income households, they all have bank accounts. It's therefore relatively easy to access detailed advice on investments and other products. Such families are already plugged into the "wealth" management system. But there are not less than ten million US households without a bank account. This places immediate barriers in their way if they want to ask for a loan or pay for a home insurance policy for example.
In what has become an increasingly cash-only market for the low-income families, retailers like Sam's Club now offer immediate point-of-sale access to banking and insurance services. There's even a small business loan service that offers bridging loans to businesses that cannot get service from banks. However, you should never assume these retailers are altruistic. They are for-profit and so their offers come with small print in the terms and conditions. Just because you see the chance to buy, do not assume this is good value. The bread may be cheap and keep you from starving. The home insurance quotes may look similarly tempting, but never be a sucker and buy without first checking online to see what other offers are out there. You should always compare the home insurance quotes from all the retailers and the insurance corporations before picking the best deal.