Virgin Money has announced it will offer a “fully functional” SME banking offer by 2020, with the first product launching January 2018.
It now intends to provide SME savings accounts from January, and then follow with business current accounts by the end of 2018. It aims for £5bn SMEs deposits over five years, with the first £500m coming in over the first year.
Chief commercial officer Hugh Chater said: “Now is the perfect time for us to enter banking. It is a market which see as ripe for disruption, and a perfect fit for our brand. Given our expertise in savings, we see these [SME] deposits as a natural entry point for us into SME banking.
“SME deposits are 50% to 60% cheaper [for banks] than retail deposits. So they not only present an opportunity to increase and diversify our funding sources, but also do this at a reduced cost.”
Chief executive Jayne-Anne Gadhia added: “We are as good as Aldermore in terms of attracting SME deposits, and on top of that, we can also offer current accounts.”
The bank also mentioned a potential bid for the RBS alternative remedies package in the first half of the year. The package was agreed by the government in place of launching Williams & Glynn as a separate bank from RBS.
Chater said: “The regulators have been talking for some years now about increasing competition in the market by reducing barriers to entry.”
“The recently-announced RBS remedies aim to stimulate competition … and could double annual switching rates, making it increasingly difficult for the large, incumbent players to maintain their stranglehold.”
Finally, the bank hinted at plans to offer forex and accountancy services to businesses at an unspecified point in the future. These would be offered through external partnerships, allowing Virgin Money to keep the activities off their balance sheets.
However, Gadhia specified that the partnership project was “out-of-plan” for the moment, with the focus being put on SME deposits and current accounts.
“Once we have got there, the future path is broad and bright,” Gadhia added.