Many U.S. grocers act as landlords to bank branches in their stores, renting space to local and regional banks. The real money, though, is in doing it yourself.

That's certainly the case in Europe, where retailers are far more involved in the banking business. Two-thirds of the top 15 European food retailers control a financial institution; 12 offer financial services, including mutual funds, credit cards, and certificates of deposit. Tesco and Sainsbury, the United Kingdom's two largest grocery chains, have run joint ventures with Scottish banks since 1997-and turned a profit on them last year. Grocers looking for something other than IT to help pad their thin profit margins should take notice.

The biggest North American players are Canadian. Loblaw, Canada's largest grocer, teamed up in 1998 with Amicus, an arm of the Canadian Imperial Bank of Commerce. The former provides the brand; the latter delivers plug-and-play financial services. Loblaw earns a fee for every new customer signed up in its stores. The bank, named President's Choice, acquires 15,000 new customers a week because of its no-fee concept-checking accounts and online bill payment are free-and low-priced mortgages and credit cards, says Geoff Wilson, Loblaw's director of investor relations.

The marketing efforts are boosted by a co-branded MasterCard, launched this year, which links the bank and the supermarket. A loyalty program rewards cardholders with a 1% rebate on groceries. No matter where they use the card, shoppers can get the discount in Loblaw stores. Signing up for bank products also earns points on the credit card.

Loblaw can't access bank databases for customer information, which would make great fodder for data mining but is proprietary, as regulated by law. Loblaw wouldn't necessarily pursue that anyway, because of the cost. Says Wilson, "You've got lots of data, and it's very expensive to mine it. We'll pursue it down the road, but right now we're trying to grow the bank and cement the loyalty program."

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