Julian Knight: Strap yourself in for a bracing ride now Branson's in charge

 

You rarely get exactly what you wish for in life, but sometimes you can get fairly close. I wanted Northern Rock to be re-mutualised once it has passed out of government ownership.

This would have given the bank back to its customers and returned it to the status quo which existed successfully for a century before the disastrous decision to demutualise.

However, the Treasury doesn't want to wait. and although the price looks a poor one the guarantee of no compulsory redundancies at the Rock for three years is a welcome fillip for the recession-haunted North-East.

So, instead, we have Sir Richard Branson's Virgin Money buying the Rock. Almost as soon as the queues started forming outside the Rock four years ago Sir Richard started stalking. And at £747m the bearded one has yet again bagged himself a potential bargain, particularly as the new group doesn't have the riskiest Rock loans attached.

But what will Virgin's long-trailed entry into the bank market mean for customers?

Well, those close to Sir Richard say he is as passionate about the Rock as he is about his airline.

Improved customer service is being rightfully identified as key, and the Rock will benefit from the contrast between the tainted big high-street names and that of the Virgin brand.

I'm an unashamed fan of most things Virgin branded – apart from the ghastly cola. I always look to fly Virgin first; I have their travel insurance, and am even a regular passenger on their trains which these days do actually seem to arrive on time. There is a feeling of a little greater care being taken with most things Virgin. Not quite as clearly so as say John Lewis, but not a million miles off that.

However, in the harsh world of retail banking a slightly funkier feel to branches – the 70-plus Rock branches can expect a facelift soon as well as perhaps a sharper call centre operation – isn't going to pull up any trees. What the Rock will need is a brand-new range of products and I don't mean irresponsible ideas such as the Together mortgage which lent customers up to 125 per cent of a property's value and helped bring the bank to the brink of collapse in 2007.

The savings rates and mortgages offered by the Rock at the moment are, at best, middle of the road. In the case of the Esaver at 0.5 per cent, downright stingy.

Personal banking is very price sensitive and no amount of Virgin marketing sparkle will be able to dress up a bad deal. Nearly every major breakthrough product in personal finance sector in my memory has been primarily been based around an eye-catching rate. However, at a time when the base rate is just 0.5 per cent and there is the real possibility of the chaos in the eurozone leading to another credit crunch, designing a real market offering a real stand-out rate is going to be an Olympian challenge.

But Virgin Money has a good record of innovation. The One account, the first truly flexible mortgage in the UK and one that Sir Richard was very keen on, was a standout, while the credit card, thanks to a good deal struck with MBNA, has always been among the most competitive out there.

If I was at the Rock and looking for areas in which to do something different, it would be for today's first-time buyers, who wrongly feel there are no borrowing options; inflation-proof savings and a free current account with the sort of services attached that you'd only normally see with the fee-charged package account.

If Virgin wants to really shake up the high street then the company is going to have to think differently, price keenly and not just rely on gimmicks. It's going to be as interesting to see Virgin take on the big banks as it was the transatlantic airline carriers a generation ago. It surely will be a rocky, but exciting, ride.

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