Joint venture between Citibank and Virgin Money to tackle the big four

A new joint venture between Citibank and Virgin Money will offer credit cards, mortgages, and retail deposit and savings accounts in Australia, in an effort to reduce the market share of the four largest Australian banks.

The profit sharing agreement, concluded late the previous week, has Citibank providing infrastructure, funding, and its large banking network exclusively to Virgin Money for ten years. Citibank is the retail banking division of Citi, a global investment bank, while Virgin Money is the financial services arm of Richard Branson’s Virgin Group.

The first credit card to be offerred by the joint venture is scheduled for roll-out next July. It will be followed by savings and transaction accounts available only through the Internet or Citi’s call centres (no branches).

Another credit card will be linked to Virgin Blue, the budget airline, with a points reward scheme intended to directly compete with Qantas. The joint venture will also offer mortgages branded with the Virgin name. Currently the big four banks have a stranglehold on the mortgage market.

Virgin Money’s previous Australian joint venture, with Westpac, captured 750,000 accounts with a low interest offer, but the contract expired and Westpac assumed the accounts.

NAB also bid for the joint venture but lost out to Citibank.

Citibank intends to utilise the joint venture with Virgin Money to capture a larger share of the Australian credit market, currently dominated by the big four banks. Commonwealth Bank holds 17.4% of the market, Westpac 16.6%, NAB 11.0%, and Citibank hopes to improve its share from the current 8.6% to greater than 14% within the next three years with a capture of at least 500,000 accounts through their new credit card line.

Source: http://www.news.com.au/business/money/story/0,25197,26102438-14327,00.html