The acquisition of Virgin Money customers will give Nationwide the opportunity to cross-sell its products and reduce retention risk. Nationwide’s proposed deal with Virgin Money is set to cost £2.9bn ($3.7bn) and will make Nationwide the UK’s second-largest mortgage and savings provider by market share, behind Lloyds Banking Group.
Nationwide’s rebranding at the end of 2023 saw the building society go to extra lengths to highlight its differences from bigger banking rivals, such as its commitment to keep its extensive branch network.
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Not only will Nationwide expand its mortgage and savings market shares, but GlobalData’s Global Retail Banking Analytics indicates that Virgin Money’s 8.7% credit card market share (as of Q1 2024) will boost Nationwide’s credit card market share to almost 11%. This will provide Nationwide with considerable opportunities to increase its cross-selling of products to credit card customers.
Additionally, Nationwide’s superior customer satisfaction rates suggest the provider already has highly convenient services and competitive products, therefore making it very capable of retaining Virgin Money customers. Promoting high satisfaction rates will become increasingly important as rival banks seek the opportunity to poach Virgin Money customers looking to switch throughout the acquisition.
2023 GlobalData 2023 Financial Services Consumer Survey
As competition increases in the bid to attract Virgin Money customers, loyalty rewards is a key area that Nationwide should focus on if it wants to keep retention risk low. GlobalData’s 2023 Financial Services Consumer Survey indicates that Virgin Money only had a net satisfaction score of 26% regarding loyalty rewards. This creates a gap for Nationwide to utilise by promoting its highly attractive reward products. A good example is Nationwide’s Loyalty Savers Key Product, where savings account customers can receive a £100 ($127.54) yearly payment. Eligibility guidelines require customers to have a Nationwide current account that has been used recently, as well as savings or a mortgage account with the building society.
Overall, Nationwide’s strong brand reputation and promotion of its strong satisfaction rates will ensue it keeps retention risks low among newly acquired Virgin Money customers. For the wider UK banking market this deal is set boost competition among the top lenders, consequently making it more difficult for smaller providers to remain competitive.
Phoebe Hodgson is an associate analyst, GlobalData plc
