Last week, I did a blog entry looking at how banks were going to face more intense competition in the wash-up from this financial crisis. To put it bluntly, banks will be losing market share to such forces as peer-to-peer lending, Islamic finance, boutique advisory firms and retailers setting up their own banks. All of them will be cashing in on the public disgust with banks.
One of the first out of the blocks is entrepreneur Richard Branson. The Guardian reports that Branson plans to launch an Internet bank through his Virgin Money subsidiary, exploiting the bad reputation of banks. The Guardian reports that Virgin Money is set to apply for a for a banking licence from Britain's Financial Services Authority. Branson is also reportedly talking to US investment banks and other investors about financial backing. Virgin Money is also said to be interested in acquiring Northern Rock if the British Government decides to flog it.
Just what will it do to banking? Probably not much at the outset, but if other entrepreneurs follow Branson it could become a serious problem for the banking sector.
Branson's move follows in the footsteps of retail giant Tesco which is moving into banking with a a full range of savings, loans and insurance products. Lucy Neville-Rolfe, corporate and legal-affairs director at Tesco told The Times that expanding into finance makes sense because it's an area growing faster than food. And besides, people now hate banks so it's an opportunity for Tesco and other retailers. "The lack of trust in the banks means there is a huge opportunity if you are a growth company," she said.>br />
Welcome to the future. In 20 years time, the banking sector will look very different.
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