Founded in 1930, employee-owned supermarket Hy-Vee has officially started to offer financial services to its shoppers, including standard banking services such as checking and savings accounts, as well as insurance and investing products.

The launch comes following Walmart’s decision to launch their own fintech platform, and as other retailers move into financial services to capture more of the customer wallet and commerce experience.

Hy-Vee Financial Services will offer the full suite of products and services most banks and building societies offer and will go further by integrating complementary rewards and loyalty programmes for customers who make use of its multiple business lines.

Hy-Vee’s entry into financial services is somewhat predictable given its long-held practice of expanding into different industry verticals. This is evident given that besides the approximately 270 retail locations it boasts across eight Midwest states in the US, it also has operations in construction, pharmacy-related services, food preparation and distribution, and banking.

Hy-Vee moved into banking in 1963 when it purchased the National Bank & Trust Company of Chariton, which was renamed as Midwest Heritage Bank in 1995.

Since then, Midwest Heritage has operated as any other regional bank would, offering a range of products and services across banking, insurance, and investing, and will now offer its services under the Hy-Vee brand as more and more retailers move into financial services and merge previously separate business entities.

For Hy-Vee, bringing Midwest Heritage’s services under its own banner makes commercial sense given its brand recognition, as well as the changing business models for large companies that necessitate expansion into new sectors to capture greater value from the customer relationship.

Hy-Vee follows competitor Walmart 

Several of Hy-Vee’s competitors have already started this process, namely Walmart, which is in the process of launching its own fintech in partnership with Ribbit Capital, and more recently Costco, which has launched a mortgage comparison site that will likely be its segue into financial services.

As with other retailers that are using financial services as means to form deeper relations with customers, Hy-Vee has attempted to use the industry to amplify its existing operations and has already offered a $700 gift card to customers who get a mortgage from the company.

Contrary to being behind the curve with regard to the changing banking model, Hy-Vee and Midwest Heritage have employed innovative strategies to promote their new offering, including the installation of banking kiosks at more than 75% of their stores nationwide.

As incumbent banks around the world, but particularly in the US, scale back branch networks as part of attempts to cut costs, boost profits, and move to dynamic digital-first business models, Hy-Vee may find its kiosk approach to branch solutions to be welcomed by customers.

As it stands, six of Midwest Heritage’s eight branch locations are within stores operated by Hy-Vee, and the expansion of in-person banking services of this kind, beyond kiosks, may be a factor that convinces customers to bank with Hy-Vee as incumbents withdraw at a pace that many, including regulators, have criticised.

While data from GlobalData’s 2021 Financial Services Consumer Survey suggests that preference for banking services from supermarkets and retailers remains low, the improvements in technology that have enabled the launch of digital-only banks and fintechs may enable supermarket and retailer offerings to make a comeback with improved digital functionality and lower costs. Beyond this, scope also exists for retailers to partner with banks and fintechs to make customer interactions more meaningful, lucrative, and lasting.

This was written by GlobalData banking analyst Mohammed Hasan.