Virgin has rebranded its US-based P2P lending subsidiary
under the Virgin Money banner and launched a nationwide ad campaign
as it steps up its efforts to take business from traditional banks.
It also believes that a Virgin rebranding can help save the UK’s
crisis-hit Northern Rock, writes Douglas Blakey.
Virgin Money, the financial services arm of UK-based Virgin
Group, has lost no time rebranding its recently acquired
person-to-person (P2P) lending subsidiary CircleLending with the
Virgin moniker. In the UK, it continues to target a possible
takeover of troubled bank Northern Rock.
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In another sign of the growing interest in P2P lending, Virgin
bought a majority stake in May in US-based CircleLending, a
provider of loan administration services that specialises in
managing loans between relatives and friends. According to Virgin,
the investment will form the foundation for new Virgin-branded
financial services products in the US.
The rebrand was promoted by ‘flash mob’ marketing in
Boston on 15 October, which was attended by Virgin’s founder, the
UK entrepreneur Richard Branson. Themed as a revolution for
changing the face of money, the event featured people dressed as
George Washington, handing out branded dollar bills and inviting
people to join the Virgin Money revolution.
‘Flash mob’ is a term used to describe the sudden gathering of a
group of people in a public place to do something unusual for a
brief period of time and then disappear.
Virgin also promoted an online prize draw competition offering the
chance to win a $10,000 cash prize via its changingthefaceofmoney
website.
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By GlobalDataNational campaign
Working with its US ad agency Mullen, Virgin Money has kicked off a
national advertising campaign to promote the rebrand. To date,
CircleLending’s marketing has been low key, using mainly radio and
internet ads.
Asheesh Advani, founder of CircleLending and Virgin Money USA CEO,
said: “We’ve developed a very flexible set of products where you
can pick your own interest rates, miss a payment if you want –
basically enjoy a freedom that’s totally different from what you
get at a bank. Our vision is to build a major Boston-based
financial services company.”
Initially, it intends to add education loans, financial planning
and other services to Circle-Lending’s existing mortgages, personal
and small-business loans product line-up.
“We are literally changing the face of money by empowering people
to realise their hopes and dreams, all the while keeping money
within the family. Consumers deserve to have rights when it comes
to their money – the right to choose loans that fit their needs,
the right to use money to help loved ones and the right to a
brilliant deal,” said Branson in a statement.
According to Branson, the P2P business model appealed to him
because his own business empire was initially founded by borrowing
money from his family.
Virgin confirmed the interest rate charged to US customers would
typically be 2 to 3 percentage points below what a borrower would
pay to a traditional bank. In return, Virgin will earn an up-front
fee – ranging from $100 for a personal loan and rising up to $699
for a mortgage – plus ongoing charges.
“With the rebranding, we’ll be doing considerably more outreach to
consumers and doing it in a very Virgin-esque way. You’ll find the
ads are cheekier than the US banking industry is used to,” said
Advani.
Virgin plans to rebrand Northern Rock, but faces
fight
Virgin continues to track Northern Rock, the troubled UK bank,
which had to seek emergency funding from the Bank of England in
September.
Virgin is planning to inject up to £1.5 billion ($3 billion) into
Northern Rock as part of a possible rescue deal for the bank, in
return for a controlling stake of at least 51 percent. According to
Virgin, it would keep Northern Rock “in its entirety” and maintain
its stock market listing, and rebrand the lender as Virgin
Money.
Virgin has said that Northern Rock needs a “complete rebranding”
and that it believed the business could prosper from an association
with the Virgin brand.
Virgin has teamed up with US insurance giant AIG, buyout business
WL Ross and Hong-Kong based investment firm First Eastern
Investment in its bid to take control of Northern Rock.
Analysts estimate that Northern Rock has so far borrowed £20
billion of emergency funds from the Bank of England, which any
successful bidder would require to refinance. Virgin is believed to
have held talks with Bank of America and a number of UK banks
including Barclays and HBOS about lining up finance.
Pitted against the Virgin consortium are rivals bids from two
private equity companies, Cerberus and JC Flowers. Flowers has a
successful track record in turning around ailing financial services
firms, in particular Japan’s Long Term Credit Bank, which it
purchased for $1.2 billion seven years ago. Flowers then floated it
as Shinsei Bank for $7 billion four years later.
All three bidders are seeking some form of financial support from
the UK government, but any such support will need the approval of
the European Commission.
