SARAH FERGUSON, PRESENTER: Australia's two supermarket giants, Coles and Woolworths, already enjoy enormous market power and it looks like they'll soon be coming to a bank near you. In their latest move, the supermarket are forging into the finance and banking sectors.

The move comes at the same time as Coles and Woolies are expanding their push to collect data on their customers' lifestyles, shopping habits and personal finances. And here's the rub: what you buy at the checkout could drive up your premiums and scotch your chances of securing a loan.

Sean Rubinsztein-Dunlop reports.

SEAN RUBINSZTEIN-DUNLOP, REPORTER: The days when Coles and Woolworths only sold groceries are long gone.

Now supermarkets are in the business of petrol, liquor and mobile phone plans. You can go to their pubs and take a punt on their poker machines. Woolies has even trialled health checkups at the checkout.

Coles and Woolworths have also moved into financial services with more than a million Australians signing up for their credit cards and their insurance products.

Now it looks like the supermarkets are taking on the big four banks.

GRAEME SAMUEL, FMR CHAIR, AUST. COMPETITION & CONSUMER COMMISSION: There's rumours around that Coles may be seeking a banking licence. They're apparently now seeking to join the Financial Services Council, which is the lobbying group of finance companies.

SEAN RUBINSZTEIN-DUNLOP: Woolworths and Coles have registered the trademarks Woolworths Money, Coles Money and Coles Financial.

RICHARD WORMALD, GM FINANCIAL SERVICES, COLES: We announced recently the formation of a joint venture financial services business. That will start operating next year once we've achieved the relevant regulatory approvals and the focus of that will be credit cards and personal loans.

SEAN RUBINSZTEIN-DUNLOP: Potential business partners are lining up.

JOHN SYMOND, FOUNDER, AUSSIE HOME LOANS: I know for a fact that the supermarkets are looking at home loans. Coles and Woolies have got millions and millions of customers and, hey, boys, if you want to talk to me, give me a call.

SEAN RUBINSZTEIN-DUNLOP: Coles' and Woolworths' push into finance is straight out of the playbook of the British supermarket giant Tesco, which established a bank in the late '90s.

ANDREW HIGGINSON, FORMER TESCO BANK CEO: What we tried to do was follow customers into the areas where they were spending money, follow the money, if you like, follow the money into where customers were spending and one of those areas was financial services.

SEAN RUBINSZTEIN-DUNLOP: Tesco's competitive edge over other banks is its data collection. Through its loyalty program, it gathers valuable information on customers' budgets, shopping habits and lifestyles. Tesco has collected so much information, its database rivals the records held by European governments on their citizens. Tesco uses its data to tailor banking products to shoppers.

ANDREW HIGGINSON: You can tell a lot about a person and their lifestyle from the shopping they do. Simple examples would be if you had a group of customers who tended to buy their fuel from Tesco, tended to buy it in the same place every time, you know, you could deduce from that that those customers might only travel short distances in their local neighbourhood. and in a car insurance sense. that's a lot safer, if you like, there's a lot lower risk of accidents and that kind of thing than someone who might be driving thousands of miles up and down the country every year.

SEAN RUBINSZTEIN-DUNLOP: Back in Australia, 7.30 has obtained a recording of a Woolworths executive giving an extraordinary example of how the data can be used.

PENNY WINN, DIRECTOR, GROUP RETAIL SERVICES, WOOLWORTHS (Courtesy, AdNews): You see, the customers who actually drink lots of milk and eat lots of red meat - so that's what's in the shopping basket - are very, very, very, very, very good car insurance risks. Versus those who eat lots of pasta and rice, fill their cars with petrol at night and drink spirits. So what that means is we're able to tailor an insurance offer that targets - that give us those really good insurance risk customers a really good deal. It helps to avoid the bad insurance risks.

MATT LEVEY, CHOICE: That's really a level of sophistication, a level of data analysis that has never been available before, and if you then consider that they're moving into markets such as credit cards, then into banking and you start overlaying those sets of data, it starts to create businesses who have a degree of power and a degree of information about Australians that has never previously existed.

TROY HUNT, DATA EXPERT: Some purchases can be very explicit in terms of what sort of condition you might be in. So, for example, are you a female purchasing a lot of maternity-related products? And if you're in the midst of applying for a home loan and perhaps your income is a significant portion of that decision-making factor, could that influence the people providing the finance to say, "Well, you know, hey, this might be a different risk category to what we originally thought."

SEAN RUBINSZTEIN-DUNLOP: Coles gathers information on 4.6 million households, not just at the supermarket, but from its flybuys partners including the health insurer Medibank, energy providers and telcos.

Last month, Coles launched a new mobile wallet, a combined credit card and flybuys app which cranks up the incentives for shoppers to earn points and the ability of Coles to gather data.

RICHARD WORMALD: And on the back, we've got this pay tag, which is like your credit card and your flybuys card. So when you're paying, you just tap your phone against the PIN pad and you're done.

SEAN RUBINSZTEIN-DUNLOP: Coles new head of financial services, Richard Wormald, is a former Tesco executive. He isn't ruling out using data to set customers premiums and decide whether they'll get loans.

RICHARD WORMALD: We're always looking for new ways of delivering better value, but today we actually use a very traditional mechanism, looking at types of car, where people live, to calculate their insurance pricing.

SEAN RUBINSZTEIN-DUNLOP: So it's certainly a possibility into the future.

RICHARD WORMALD: Well as technology changes, we will reassess that, but as I say, we set ourselves a very high bar in the terms of the way that we store and collect data and we'll try and be transparent with customers and be clear how we're using that.

JOHN SYMOND: I expect to hear a lot more from the Coles and Woolies, maybe Telstra, maybe Google. They've all got millions and millions of names on their databases and they'd love to get their long hands in our pockets. And I've got no doubt these guys are big enough and strong enough that, you know, if they want to play, they'll play hard.

SARAH FERGUSON: Wow. Sean Rubinsztein-Dunlop reporting.