Virgin Money has announced plans to allocate £130 million towards enhancing its cybersecurity measures using artificial intelligence (AI) and technology. However, this substantial investment is expected to impact the bank’s financial performance and necessitate further cost-cutting measures.
Investing in cybersecurity
Virgin Money has revealed its intentions to invest £130 million in developing advanced AI and technology to bolster its defence against cybercrime. This initiative comes in response to the escalating sophistication and risk of cyberattacks driven by advancements in AI technology.
The investment program is set to span over three years, with approximately £40 million allocated for the fiscal year 2023-24. The financial institution acknowledges the need to enhance its cybersecurity infrastructure, given the growing prevalence of online channels and social media, which have contributed to a surge in fraudulent activities.
Impact on financial performance
While the commitment to fortify cybersecurity is commendable, Virgin Money anticipates that this significant investment will directly impact its financial performance. To fund this cybersecurity initiative, the bank has adjusted its cost-cutting strategy, aiming to reduce costs by £200 million annually, an increase from the previous target of £175 million. This will involve further strategic rationalization of the bank’s real estate portfolio, outsourcing, and systems simplification.
Virgin Money foresees a continuation of cost-cutting actions, which have already led to branch closures and reductions in office space, in line with the industry’s shift towards online banking. Consequently, there may be potential implications for jobs within the organization, as some roles may become obsolete during the digitization process. However, the bank also plans to create new positions in fraud and financial crime prevention, ensuring a balance between necessary streamlining and expanding critical functions.
Strategic focus on cybersecurity
The decision to allocate substantial resources to cybersecurity reflects the bank’s commitment to safeguarding its customers and financial assets from the evolving landscape of cyber threats. David Duffy, the Chief Executive of Virgin Money, emphasized the importance of this investment in future-proofing the business and mitigating the risks associated with fraud strategies driven by AI advancements.
Although the short-term impact on returns is expected, Virgin Money believes this strategic investment is a prudent step to protect the bank and its customers in the long run. By proactively addressing the growing risk of cybercrime, the bank aims to support sustainable shareholder returns over time.
Rising cyber threats
Virgin Money’s decision to bolster its cybersecurity comes when cyber threats rise. The proliferation of online channels and social media has increased fraud and financial crime in the UK. Consequently, banks face the challenge of bearing the full extent of fraud losses and associated penalties.
Furthermore, the field of cybercrime is constantly evolving, with new technologies, including AI, contributing to the increased sophistication and risk of cyberattacks. To counter these threats effectively, Virgin Money plans to allocate its £130 million investment toward developing new IT solutions, including fraud prevention platforms and upgraded voice biometrics. The bank will also strengthen its internal teams dedicated to detecting fraud and assisting affected customers.
Virgin Money’s commitment to investing £130 million in cybersecurity is a proactive response to the growing threats posed by cybercrime, fueled by advancements in AI and technology. While this investment is expected to impact the bank’s financial performance and necessitate further cost-cutting measures, it reflects the institution’s dedication to safeguarding its customers and ensuring the long-term viability of the business in an increasingly digital world.