New banks set to stimulate IT investment

The government's plan to increase competition in the banking sector is taking shape as Tesco, the Post Office and Virgin Money set themselves up to take...

The government's plan to increase competition in the banking sector is taking shape as Tesco, the Post Office and Virgin Money set themselves up to take on retail banking giants.

These banks will have to invest in IT to enable them to take on existing banks.

Virgin Money has revealed its ambitions in the banking sector. The company has made a bid for the Royal Bank of Scotland branches that are up for sale and outlined its plans to become a full service bank.

Virgin received a £100m investment from WL Ross & Co, which in return was given a 21% shareholding.

"The strategic investment from WL Ross will provide new capital to allow Virgin Money to accelerate the expansion of its full-service retail bank and the creation of a branch network," said Virgin Money.

The investment follows Virgin Money's acquisition of Church House Trust, which provided the platform and banking licence from which Virgin Money will develop a retail banking business in the UK - offering a full range of products to consumers under the Virgin Money brand.

To offer a full range of retail banking services investment in IT is required.

Tesco set its stall in November when it chose an off-the-shelf core banking system from Fiserv to support its moves towards being a full-service retail bank.

A core banking system will help it add services such as current accounts.

Tesco Bank already offers general, motor, home, pet and travel insurance, credit cards and personal loans, personal savings, and a network of cash machines. It has more than six million customers.

The government has also announced its plans to make the Post Office a bank offering current accounts as well as mortgages.

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