Virgin Money has applied to the UK's Financial Services Authority for a full banking license as it plans to start taking deposits and offering mortgages online.
It has been widely expected that a license application would be put in by the financial services arm of Richard Branson's empire ever since its failed attempt to buy Northern Rock in 2007.
Virgin Money was launched in 1995 and claims over two million UK customers, offering credit cards, personal loans, savings products and insurance. Sales rose from around £70 million to £100 million in 2008 with profits estimated at £30 million.
If a license is granted, it is now expected to initially offer products online before building a branch network. This would be partly achieved through acquisitions, with a second bid for Northern Rock widely touted.
The nationalised lender is set to be split by the government into "good" and "bad" banks. The good bank could then be sold off to a new market entrant to claw back some public money and increase competition in the sector.
However, Virgin could face competition for the Rock from Tesco, which is also aggressively expanding its financial services unit in a bid to take advantage of public disillusionment with traditional high street players.