Branson enters banking's already packed market

Virgin Money

 

 

 

 

 

Scarcely Virgin territory-Branson enters banking's already packed market

The first product launch a day later was welcomed by personal finance experts: a savings account offering a competitive 2.85% regardless of whether the deposits are placed through one of Northern Rock's 75 branches, online, by post or over the phone. There are no differences in rate whether the customer chooses an Isa or a standard savings account. What's more, customers can choose to operate their account online, through a branch or over the telephone and still benefit from the same great rate. James Daley, money editor at consumer organization Which?, says: "Virgin has got very noble intentions but they are entering a mature market and it's going to be very difficult to change behavior. Customers don't have any appetite for paying." Virgin Money itself has been around since 1995, offering savings, credit cards, mortgages, and insurance products online, and opening two high street branches last year. Then there are the would-be banks – including Walton & Co, fronted by banks analyst Sandy Chen, and Nbank, run by former Northern Rock boss Gary Hoffman – that have so far been unable to achieve their goals. The bulk of the new entrants and prospective entrants have identified the same gap – proper banking for retail customers and small and medium enterprises-SMEs. A lot of us are talking about higher service, direct contact with experienced bankers, and charging was probably an element of that," he says. Much depends on which part of the financial services industry new entrants are trying to crack. Sir John Vickers's independent commission on banking (ICB) found that over the last decade new entrants had been successful in winning market share in credit cards as much as 18% – but had much more limited success in current accounts (less than 2% in market share). Even in mortgages and savings products, new contenders have struggled since the 2008 banking crisis to register market shares of much more than 5%. Before the crisis, it was easier for new players to start selling mortgages because they could obtain cheap funds from the financial markets to lend out. The commission points out that only Metro Bank – which has 10 branches and hopes to launch 16 more this year, but refuses to say how many accounts it has opened – is the only recent new challenger in the personal current account market. Current accounts, though, are still in "development phase.