The firm expects beta-testing to begin in the second half of 2018.
Virgin Money is gearing up to take on the likes of Revolut and Monzo Bank. The financial services firm, part of the Virgin Group, published its full year results for 2017 today, revealing that it spent £38.3m on building a new digital banking platform last year.
The bank it hopes to build will be data-driven and customer-centric, allowing it to take advantage of “significant technological and regulatory changes” in UK retail banking – a statement we must assume relates to the recently implemented Open Banking framework. Open Banking rules allow third-parties to access transactional bank data on customers in a way that has never before been possible.
Virgin says that the digital bank will allow it to expand into the current account and linked primary savings market. It is already active across mortgage, credit card and retail deposit markets. The hope is that, in time, the digital bank will improve the firm’s cost efficiency, resulting in enhanced returns for shareholders.
Virgin enjoyed a strong 2017 in which it exceeded market expectations for the growth of its core products. It notched profit before tax of £273.3m, up 28 per cent on the previous year. Despite this, the company saw fit to tweak its strategy.
“We refreshed our strategy during the year to address and capture the strategic opportunities arising from the technological and regulatory changes shaping UK retail banking,” said Jayne-Anne Gadhia, chief executive of Virgin Money. “Broadening our customer appeal through the development of our SME and digital bank propositions will provide access to a wider pool of UK retail banking revenues and further diversify our funding base.”
Disruptors such as Revolut, Starling and Monzo have each gained significant traction in the UK’s vibrant neo-banking market, with the former now up over 1.5 million customers. But it’s still early days, and these fintech firms remain largely reliant on venture capital for scaling their businesses. Virgin is banking on disrupting these disruptors.