CYBG to shake up challenger bank market with $1.6 billion offer for Virgin Money

Clydesdale Bank and Yorkshire Bank has made a £1.6 billion takeover offer for Virgin Money in a move which may herald a shake-up of the UK's challenger bank market.

Virgin Money is currently considering the offer, which would create a brand with six million personal and business customers capable of taking on the UK's biggest lenders.

Virgin Money spent £38.3 million last year building the technology backbone for a new digital challenger bank, while CYBG launched its own online and mobile-only bank B, back in 2016.

Commenting on the proposed deal, Thomas Moore, investment director for UK equities at Aberdeen Standard Investments, told the BBC's Today programme that it was possible that the proposed takeover could trigger a wave of deals among other challenger banks.

"What the UK needs is strong competition between strong banks," he said."If you have too many small lenders... without the scale economies that the likes of Lloyds and RBS has, then you'll find that the competitive environment is too tilted in favour of those big mainstream banks."

Related Companies

Yorkshire and Clydesdale Banks Virgin Money

Channels

Retail banking

Keywords

Mobile & online banking Mergers and acquisitions

Comments: (4)

Paul Love - Konsentus - Nottingham 08 May, 2018, 12:23

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The scale economies of TSB and RBS, have not been serving their customers at all well recently.

What the consumer needs is new competition between challenger banks and established banks to get the established banks to raise their game rather than just acquire the challengers to kill the threat.

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Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 09 May, 2018, 13:03

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For years, I've observed the following FI Innovation Playbook: Don't drink the Kool-Aid of every shiny new technology; Wait & watch for fintech winners; Buy / make only what works. We saw it earlier in Prepaid Card with eCount, in Gift Card, with Revolution Money; and most recently, in Mobile Wallet, with Zelle. We're seeing it again in this potential deal between CYBG and Virgin Money.

This playbook works very well. Direct-to-Consumer Fintechs chant the disruption mantra only to raise VC funds at frothy valuations. The moment they get an opportunity to flip their companies, they sell out to traditional banks - and out goes all their song and dance about taking care of consumers' interest yada yada yada.

Consumers may be justified in wanting traditional banks to up their game but they're naive to expect it to happen via this neobank / challenger bank movement.

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A Finextra member 15 May, 2018, 07:53

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I agree with your observations Katharaman, however just take a look at the Banking Royal Commission in Australia and see why the shine has diminished in FI!

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Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 15 May, 2018, 11:37

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@Paul Vieros:

TY for your comment. I Googled "Banking Royal Commission" and the first result was "The real problem with royal commissions" (http://ow.ly/sZsr30k0iv2).

Should I bother to read this article?:)