Over the course of my career so far I have worked with some very interesting people including both Fred Goodwin and Sir Richard Branson.
I remember listening to Fred present at a session in Edinburgh around the year 2000 and saying that he was sure that there were no new innovations left in financial services. I remember how disappointed I felt and how I disagreed.
On the other hand, years earlier I had met Sir Richard Branson at his home in Holland Park. It would have been towards the end of 1994. He was talking about taking people into space – maybe even building a hotel up there! I was disbelieving but excited. I could see and feel people engaging immediately with how that might be done.
For me, innovation needs real leadership. It needs to inspire us. To drive us. To excite and to challenge us. And in the end it needs to reward us with things we have never expected or experienced before.
At Virgin Money I like to think that things are never dull. What is the point in working as hard as we all do if it isn’t exciting – if we don’t make a difference?
So I should like to share with you three stories from Virgin Money that excite and challenge us today.
Back in 2008 we had been unsuccessful in acquiring Northern Rock at the first attempt and the financial crisis had begun in earnest. We were a small business then and probably needed to make half the team redundant if we were to see out the crisis.
At roughly the same time Richard Branson had been approached for the Virgin Group to sponsor the London Marathon.
The idea was that four Virgin companies, including Virgin Money, shared the cost.
But, gradually, the three other companies fell away and we were left as the sole sponsor.
So, with no money, a big sponsorship and too many staff we needed to find a way to make the commitment pay. It was a life and death search.
We discovered that Just Giving – the online donation engine – was the sponsorship platform used by the Marathon. We also discovered that they charged 5% of every donation as profit.
So we decided to use our surplus people to build a competing business and make it not for profit.
And Virgin Money Giving was born.
Since then Virgin Money Giving has raised over £300m for charity and saved charities many millions of pounds in fees.
And Virgin Money became more famous and more people bought our products.
And I like to think that Virgin Money Giving has done a bit of good in the world. Certainly it is an innovation that everyone at Virgin Money is very proud of.
This innovation came from hardship and necessity.
But the next came from unused surplus and opportunity.
As our business was growing fast we needed to find more space in our Edinburgh offices.
We chose a building with wonderful contemporary office space at the rear of a listed Georgian building. At the front were three wood panelled rooms that we had to have – but which didn’t fit with our way of working.
So we decided to give them to our customers – and the concept of the Virgin Lounge was born.
Customers can come to our lounges to relax, watch telly, have a coffee or a business meeting. There is no catch and no need to buy anything.
Interestingly, Virgin Money branches in the same cities as lounges have seen a material increase in sales. Customers stay longer and customers introduce their friends.
It is a real win-win story that we intend to continue to invest in year after year.
So, it seems that when we are challenged it is possible to create new and valuable opportunities but that assumes that the environment is right for creativity and for development.
The current account market in the UK is currently systemically challenged and, as a result, I fear that it may prohibit product innovation and deny customers better products and better deals for the future.
Most of the high street banks operate something like a ‘closed shop’ in current accounts – made acceptable only because many customers believe they are getting their banking for free.
For, whilst many customers do not pay charges for their banking, very many do not receive interest on their credit balances and many more pay charges when they break the rules – by going overdrawn for example.
In the end, nothing in banking – or beyond – is free. Someone is compensating somewhere. And in banking it has long been true that product cross-subsidies run into trouble in the end.
We think that banks should pay interest on current accounts. That would make products more fair to everyone – and banks would then be forced to innovate in order to cover their costs.
In the same way, we think that the UK should offer banking customers a central system for their bank account details. So your account number and sort code would stay with you even when you moved banks for a better product.
This happened in the mobile phone industry years ago. As soon as telephone numbers were made fully portable regardless of service provider – the industry had to be innovative to compete. I would argue that, ultimately that gave rise to the smart phones of today – with all of the wider benefits they have brought.
Just imagine if that happened in banking…I think that is entirely possible.
However, the current review by the Competition and Markets Authority in its interim report has not taken the bold step to call for full account number portability and I do think that this is a mistake as we look to an improved banking future.
For me, traditional systems need to be challenged to drive improvement and innovation for us all.
To be honest, I think this is true in all walks of life – as well as in business.
It is even true in the European debate. It must be right to challenge the current system and to try and create a better future through renegotiation, challenge and change than just to assume that nothing can ever change and to make a yes or no decision based on that.
Because in the end everything changes. There is real innovation to be had in banking everywhere I look. And we will soon be taking normal people into space.
If we look at the world differently it changes – and that is what makes it such an exciting place to be.