Virgin Money’s attempts to become the Robin Hood of UK high street retail banking may have hit an immediate paradoxical blip after announcing plans to charge new customers who hold an account.

The group formally changed from a being a virtual bank to a bricks and mortar institution after the ink dried on its deal to buy 75 Northern Rock branches for £747 million on January 1st, 2012.

The deal kicked off its foray into the congested mess that is the UK high street retail banking market.

Virgin has already rebranded the first of 75 bank branches while embarking on a Richard Branson-led PR campaign.

Branson had initially considered the blended brand name of ‘Virgin Rocks’ but decided against the mid-life crisis sounding moniker before dumping the Northern Rock reference completely – a wise move considering the irreconcilable brand damage done as a result of the Government’s embarrassing yet obligated 2008 bailout that essentially nationalised Northern Rock but not before suffering the infamy of the first run on a UK bank in 150 years.

Naturally, Virgin will be a minor player in the broader scheme of things amongst the banking heavyweights; even relative mid-tier player, the Co-Operative, recently dwarfed the Virgin deal after winning the tender to acquire 632 branches from Lloyds bank – another bailout casualty.

But what Virgin Money lacks in size it is more than likely to make up for in self-promotion… we can be sure in 2012 the group will squeeze every ounce of exposure out of its new found status of being more than just an online bank.

Overall Virgin is coming to market claiming to offer something different, as any new entrant would of course.

By genuinely caring about you and your money and not rushing in to sell to you… it claims.

So the news that it plans to charge new customers of its current account must have come as a bit of a shock.

The group is spending a fair wedge of money advertising the fact it is in the game and ready to play (beyond the online credit card and mortgage offer it already has), but it is sprinkling its upbeat stance with a splash of ‘expectation setting’.

It is perhaps aware of legacy issues with Northern Rock that could potentially damage the broader group’s carefully nurtured brand.

Therefore it is asking for patience and understanding.

However, this is a tad cheeky as it will be charging for something most other UK banks do not charge for.

It could be that Virgin and the handful of other banks that do charge account keeping fees open the floodgates for a rise in broader bank charges and fees as the major groups struggle with a flagging profitability outlook and against a backdrop of greater capital obligations under impending Basel III requirements of which the industry simply cannot shake off no matter how loud its lobbyists cry foul.

Added to this are the many other domestic and European regulatory changes that all add up to one simple fact – the cost of being a bank is on the rise.

Ultimately, can Branson and Virgin Money do this while trying to be the customer’s friend – one of its new five core missions?

2012 is shaping up to be an interesting year already.


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