Virgin Money has set out its plans to enter the small business banking market, announcing a “refreshed” strategy that it hopes will benefit from government efforts to increase competition in the sector.
The financial services brand, owned by Richard Branson’s Virgin Group, will launch a new SME savings account in January 2018 with a target of £5bn worth of deposits within five years.
The bank has said it will begin developing relationships with its new business customers to “lay the foundations for potential broader future development in this attractive, but poorly served market”.
Following the Brexit vote in June 2016, Virgin Money called an immediate halt on its small business lending plans, shifting its priority to digital product development. At the time, the bank’s chief executive, Jayne-Anne Gadhia, said it was “a timing point rather than anything else” and indicated Virgin Money’s intention to return to small business finance once the UK economy had proved its resilience.
Now, Gadhia has said that Virgin Money was “delighted to announce the start of our journey into SME banking”.
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Virgin Money confirmed it would make an application to the Treasury to access the Royal Bank of Scotland’s (RBS) state aid remedy packages. RBS has set aside £835m to increase competition in the banking sector, funding measures to help business customers switch accounts to challenger banks, and a Capability & Innovation Fund with 15 grants available for development in the marketplace.
Alongside its renewed business banking drive, the challenger bank announced plans to roll out a new digital platform in 2019 to try and close the gap on traditional high street lenders.
Gadhia added: “Traditional banks are investing in digital transformation but are burdened by legacy systems; whilst digital start-ups currently lack the customer base to disrupt the sector on any significant scale.
“Our end-to-end platform will enable us to capture market share by taking full advantage of our unique position and competitive advantages which are defined by a well-known and trusted brand, no legacy issues and an established scalable customer base.”
Having first began lending to consumers in 1995, Virgin Money floated on the London Stock Exchange (LSE) in 2014 – valuing it at £1.25bn and providing Branson with a reported £70m windfall.
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