Citibank and Virgin Money to release new credit card and finance products

Information verified correct on October 27th, 2016

Richard Branson’s Virgin Money group has signed a 10-year exclusive profit-sharing contract with Citibank to create new retail deposit accounts, credit cards and mortgages. The joint venture came about in order to break the stronghold of the Big Four in Australia.

Citibank will provide all the tools with the Virgin Money group branding the new products to expand on their existing network.

When Virgin Money linked with Westpac five years ago release a low-cost credit card that saw some 750,000 accounts being snared little did they know of the successful launch. When that contract came to closure a year ago Westpac inherited the clients bringing them full circle.

Apparently Citibank wasn’t the only bidder for the deal with Virgin Group; National Australia Bank who has a slightly larger credit card market share, was also keen on the new Virgin deal.

Chief executive Roy Gori of Citibank has set the ambitious target of overtaking NAB in the next three years by increasing its stake of the credit market from 8.6 per cent to above 14 per cent.

Both the Commonwealth Bank (with 17.4 per cent) and Westpac (with 16.6 per cent) lead the credit card market. NAB holds 11 per cent of the share.

Mr. Gori said: “We want to break into the top four and take a market share of 13-14 per cent, and the trajectory of the business is in line with that.”

“We’re going to provide a substantial boost to the growth in cards.”

The first Citibank-Virgin credit card is scheduled for release in July 2010. After that online retail savings and deposit accounts will be rolled out. The accounts will be offered only on the Internet or through Citibank’s existing call centres, with no branch access.

A new Virgin Australia credit card linked to the budget airline offering with reward points will also be released as part of the joint venture to rival that of its competition with Qantas-associated credit cards.

Citibank is targeting to lure 500,000 customers to their new credit cards in the medium term. Future Virgin-branded mortgages should also help to compete with the Big Four banks.

Mr Gori said despite the domination of the Big Four in that sector there was room for an alternative bank.

“I would argue that this is the best time to look at launching a product like this. There is demand for an alternative because there has been so much consolidation. There has been so much market share taken by the Big Four.”

“We think the marketplace and consumers are screaming for an alternative. I think this is the best time,” Mr. Gori said.

Funding for the new credit cards will be provided from Citibank’s local balance sheet. For the long term the bank hopes to meet funding requirements from the retail deposit base.

Virgin Money had to exit a mortgage business in Australia when the global financial crisis hit because it couldn’t keep up with cost increases being a non-bank lender. The company still operates in the insurance and superannuation sector Australia-wide.

Source: The Australian

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