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September 22, 2015updated 04 Apr 2017 12:49pm

Virgin Money refusing to lounge about

While a common thread in retail banking is either the stripping down of bank branches, or a shuttering of them entirely, Virgin Money has decided to take a new approach. The launch of the lender’s Virgin Money Lounges is trying to bring a cushier experience to brick-and-mortar banking. Patrick Brusnahan writes

By Patrick Brusnahan

While a common thread in retail banking is either the stripping down of bank branches, or a shuttering of them entirely, Virgin Money has decided to take a new approach. The launch of the lender’s Virgin Money Lounges is trying to bring a cushier experience to brick-and-mortar banking. Patrick Brusnahan writes

Branches are not very popular at the moment. More than 600 branches in the United Kingdom are set to close this year according to the Campaign for Community Banking – a significant increase from the 479 closed in 2014. New banks coming into the market, such as Atom Bank, Mondo Bank and Starling Bank, have decided to ignore the branch entirely and focus on being either online- or mobile-only.

However, Virgin Money is putting greater focus on its stores and its new Virgin Money Lounges, designed by allen international, which are ‘about more than money and banking’, according to the bank’s website.

With six locations already set-up in the UK, including a new airline-themed lounge in Haymarket, London, and another set for Sheffield early next year, Virgin Money seems to consider the method to be the way forward.

Consumer comfortsUpon first entering the Haymarket lounge, one thing comes immediately to mind. Bar one solitary ATM, the building looks nothing like a bank.

Features include comfortable seating, free computer usage (on desktops and iPads), tea and coffee facilities, a virtual fish tank, and even a self-playing piano. Financial features include on-site staff and huge touchscreens to browse and learn more about products. Downstairs is where the tie-in to Virgin Atlantic begins. The seats resemble those of an aeroplane and there are even video screen windows to make it seem as if the room is up in the air.

It is certainly impressive, but why go to such lengths to provide an alternative banking experience?

When speaking to RBI, Brian Brodie, sales and marketing director at Virgin money, said: "Firstly, the brand is synonymous with being different and this is one of the manifestations that have of that different. We definitely wanted to do something which is about giving something back to the consumer. It wasn’t just about buying a product from us, it was about an experience.

"What’s better than to have people engaging with the brand in a social way rather than in a commercial way? We believe that’s more endearing for a customer.

"If you think about us, we’re not the biggest bank in the world, so therefore we have to figure out how we’re going to acquire new customers and this is one way of doing it. However, this isn’t just about acquiring customers; it’s rewarding existing customers. That combination is quite powerful."

OriginsThis approach first emanated from the acquisition of Northern Rock by Virgin Money. Before the move, Virgin Money was very much a digitally-led bank, which Brodie said it still was, but with the capture of Northern Rock, the bank suddenly had a lot of physical outlets.

The lounge idea was already in its early stages, but now the space was there to be able to realise the notion, despite some of the outlets not being in the best location.

Brodie said: "We found there was a power between the concept of a lounge and the concept of a store and, increasingly, these concepts were starting to come together into one experience. It was a case of ‘How do you start to bring the concepts together and make them more powerful as a one, rather than two separates?’

"The first one we did was in Glasgow. We moved a store which was in the secondary or tertiary part of Glasgow and moved it to a prime site right in the middle of Glasgow. We moved the store there and put the lounge and created a very similar experience to [the Haymarket lounge]. That does work for us. It’s quite symbolic of the general industry push away from product selling and hard selling to something which allows the customer to feel able that they can buy from us. It’s more led by them than led by us and we think that’s where financial services needs to move to."

Michael Allen, allen international’s Founder & Group CEO said: "Once again Virgin Money leads the way with innovation. It’s a joy to work with a bank that has a vision of the future which is not tied down to traditional thinking in this time of new technology and the omni-channel experience."

Feedback and moving forwardWhile it remains early days, the new lounge concept has been receiving very positive feedback. According to Brodie, every customer that uses the lounge brings half a person with them (on average). This is due to the lounge not being a selling zone and customers ‘don’t feel under any pressure when they come in here’.

Brodie said: "Of course, that has a commercial benefit for us because, inevitably, people come into the experience and link it with their financial needs. The next time they need a savings product, we’ll be first in their minds. So it works for them and it works for us. Everybody is better off."

The reason Virgin Money was able to do make a move such as this was due to the relatively high levels of trust that brand has obtained. Even before the post-financial crisis world, trust has been an invaluable resource for banks.

On this, Brodie commented: "We’re lucky enough that we’ve got that trust. Having said that, trust is easily lost and hard to win. It works for us, I believe, because of the nature of the brand which has a degree of uniqueness to it and a slight cockiness and funkiness. It allows space for the brand to do something like this. I think it would be difficult for our competitors to try and land something like this."

Branchless challengersUpcoming entrants to the market have decided to skip the branch channel altogether and make everything completely digital. While he sees the value in digital, Brodie felt that the physical channels should not be underestimated as ‘consumers still want it’.

He added: "We definitely believe that the world will be going mobile and we’ve invested quite heavily in that. Almost 50% of our digital traffic comes through mobile. Whether people want to bank entirely on mobile, if nothing else, I think the consumer will tell us.

"At the moment, the challenge for new banks is to get the right mix of customers to allow them to grow rather than just a group of consumers that may not have the dynamic to allow growth."

The main reasoning for the Virgin Money Lounges is to find that perfect combination between ‘the human touch and the digital experience’.

He said: "We’ve got 80 physical units, therefore the physical part of our business isn’t huge. About 70-75% of our business is digitally led. What we tend to do is advance the digital side of our business and drop that into the physical. As we develop things online, we can deploy that in the stores.

"It’s simply just trying to help the customer through that process. When a customer wants a product, we give them an iPad and that links into the digital experience online. We think because of the physical interaction between humans, the process becomes more assisted. It’s a different experience to if you just went online by yourself."

Brodie concluded: "We’re definitely planning to open more [Virgin Money Lounges]. We’ve got another planned for the beginning of next year in Sheffield and we’ll be continuing to look at other sites. I think the way we describe this strategy is that it isn’t a Carphone Warehouse kind of approach with a store in every corner. That’s what most people are pulling back from.

"Concept-wise, this is as much about being able to give something back to customers than anything else because we know that customers want to interact with us physically. The whole idea of what that physical experience is going to be in the future is definitely changing and this is part of our approach to that."

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