What interesting news that Virgin Money is buying up Northern Rock. Not only is Virgin saying that there will be no redundancies (at least for 3 years), they are also promising to open more branches and to expand.
It is an extremely bold move; though some will argue that the British government has not recouped the money they spent keeping the Rock afloat during the middle of the banking crisis.
Nevertheless, the £747m Virgin will hand over to the British government gives a significant chunk of cash back to tax-payers and in many ways vindicates the decision of the government to save the bank.
The real story is going to be around customer service. Virgin Money already has around 3m customers to the 1m at Northern Rock. The Rock will be rebranded as Virgin Money throughout the country and the customers all rolled into one entity.
Margins are low in the British retail-banking sector and there has been a traditional clique of retail banks that has not changed very much since the takeover of Midland bank by HSBC in 1992. With a market that has not changed much for a long time and the injection of a company with the brand attitude of Virgin, there is going to be some great opportunities to use customer service as a key attribute for retaining – and winning – customers.