Virgin Money ramps up cost cutting as it unveils £130m plan to fight cyber crime
The lender said it would need to cut costs by £200 million a year, up from £175 million previously, to pay for the investment plans.
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Your support makes all the difference.Virgin Money has unveiled plans to spend £130 million on artificial intelligence (AI) and technology to help fight cyber crime, but warned the move would impact its performance and lead to further cost cutting.
The high street lender said the spending programme would span three years, with around £40 million earmarked for 2023-24, and comes as new advances in AI have increased the “sophistication and risk of attacks”.
Virgin Money said it would need to cut costs by £200 million a year, up from £175 million previously, to pay for the plans through “further strategic rationalisation of our real estate portfolio, outsourcing and systems simplification”.
It said to expect “more of the same” in terms of cost-cutting actions, having already shut branches and trimmed office space amid the shift towards online banking, with the potential for more jobs to be impacted.
We do expect some roles to disappear going forward as we digitise the bank and to reflect the property consolidation, but we are adding roles in fraud and financial crime
The group’s chief financial officer Clifford Abrahams said: “We do expect some roles to disappear going forward as we digitise the bank and to reflect the property consolidation, but we are adding roles in fraud and financial crime.”
It follows the group’s announcement in July that it would shut almost a third – 39 – of its bank branches, leaving it with around 90 across the UK, in a move that put 255 jobs at risk.
Details of the cyber crime investment came as the group reported full-year statutory pre-tax profits tumbling 42% to £345 million as it set aside £309 million for loans expected to turn sour, up from £52 million the previous year, largely due to rising arrears in its credit card arm.
The group said it expected a “continued increase in arrears” in the new financial year amid a more subdued economic outlook.
Virgin Money added that he cyber crime prevention plans would also put back goals to deliver “double-digit statutory returns”.
David Duffy, chief executive of Virgin Money, said: “We are stepping up investment in our technological capability to future proof our business and protect our customers from the growing risk of fraud strategies driven by advances in AI.”
While the investment will impact on returns in the short term, we believe it mitigates against the risk of greater impact on the bank and our customers in the future
He added: “This is the right thing to do for customers and the bank in the long term, safeguarding and protecting both as the environment evolves, and will support sustainable shareholder returns over time.
“While the investment will impact on returns in the short term, we believe it mitigates against the risk of greater impact on the bank and our customers in the future.”
The group said its plans to invest in fraud and cyber crime prevention come as the threat has risen significantly recently.
It said: “The rapidly increasing prevalence of online channels and social media are driving higher instances of fraud and financial crime in the UK.
“Increasingly, this will become an area where banks bear the full extent of fraud losses and associated penalties.
“Cyber crime represents another area of significant development, with new technologies including AI increasing the sophistication and risk of attacks.”
It will put the money towards new IT to combat financial crime, including new fraud prevention platforms and upgraded voice biometrics, while also boosting its internal teams working on detecting fraud and helping impacted customers.