Virgin Money to Accelerate Shift to Digital Banking

Challenger bank Virgin Money will “accelerate” its switch to digital banking services but warned the move will be costly in the short-term.

Virgin Money’s “Digital First” strategy will include the launch of a digital wallet including embedded rewards through the Virgin Red loyalty scheme and payment solutions including a buy now, pay later (BNPL) service. The first iteration of this digital wallet, which Virgin Money says will be “unique” in a market crowded with digital wallets, will arrive in 2022.

Staff will also continue remote working, with Virgin shutting some offices and data centres.

Virgin says it’s already reaped the benefits of a “digital-led approach.” New sales of Virgin Money’s current account—with a slick app— hit 135,000, up 95% from the previous year. This included gaining the third-highest number of current account customers through the current account switch service (CASS) between April and June, behind app-based bank Starling.

Virgin has also seen strong take-up of its new cashback credit card, which uses purchase data to offer customers cashback of up to 15% at retailers relevant to them and is managed through an app. Launched in February, the Virgin Money Back scheme already has 230,000 customers on board.

This is despite an IT meltdown that locked customers out of their apps and web portal for an entire day in April.

On the strength of those sales and “strong financial momentum,” Virgin Money expects underlying profit before tax to rise to £801m.

“As a result of Covid, the pace of digital change has accelerated with multi-year developments now achieved in just one year,” chief executive David Duffy said.

“Competition is increasing and customer expectations are rising rapidly,” he added.

As it develops digital solutions, Virgin Money will reduce its physical footprint: the bank in September announced that it will shut one in five branches in early 2022.

This digital transition and efficiencies gained will save the bank £175 million annually by 2024. However, the bank will need to invest £275 million to realise this restructuring. Shares in the bank dipped 7.3% yesterday on the release of these results.