Lloyds banks on digital commitment for growth

Stuart Lauchlan Profile picture for user slauchlan February 13, 2014
Lloyds Banking Group intends to prioritise the development of "digital capabilities" over the coming 12 months, after reporting its first annual profits in six years.

A sign for the Lloyds Banking Group who will signal thousands more job cuts-742698
Here in the UK banking downtimes have been in the news rather a lot of late.

One of the busiest days of the pre-Christmas holiday period was dominated by a massive failure at the Royal Bank of Scotland, while last month saw a three hour outage at Lloyds Banking Group.

Now I have to admit at this stage that I don’t have much luck with online banking in any form. My own Lloyds account which was set up last year did nothing for my blood pressure levels as the bank took literally weeks to get my online account up and running.

This resulted in some angry phone calls to indifferent call centres and physical visits to the local branch, where the staff were eager to help, but unable to do so.

So I was interested to hear the commitment made this week by Lloyds Banking Group that it intends to prioritise the development of "digital capabilities" over the coming 12 months, after reporting its first annual profits in six years.

The company, which owns the Lloyds Bank, Halifax and Scottish Widows brands, has created a new Digital, Marketing and Customer Development function to:

"focus  investment and ensure success in retail is replicated by sharing digital product development across all divisions".

The bank said it has over 10.5 million active internet banking users, as well as four million customers who regularly use mobile banking services.

In 2013, it processed 1.24billion log-ons in 2013, up 16% on the previous year and expects that number to reach 1.4 billion in 2014.

Half of the 2013 figures came from mobiles and tablets.

Lloyds Banking Group chief executive António Horta-Osório said:

"Looking ahead, we see a range of opportunities to grow our business with both retail and commercial customers, supported by our revitalised Lloyds Bank and Scottish Widows brands, and the good momentum we have in our Halifax challenger brand and in Bank of Scotland."

“The next phase of our journey, now that we have substantially finished the reshaping and strengthening of the bank is to grow, taking advantage of the economic recovery and of the reorganisation of the business achieved over the past 2.5 years.

“Going forward, digital technologies will increasingly be a key development area across all our brands. And that's why I have reorganised the bank, making digital a group-wide function reporting directly to me.”


Mark Fisher, Director of Group Operations, expanded on this, arguing that the digital push fits into the wider Simplification strategy in place within the Group. He explained:

“Simplification is about improving service, as well as reducing costs. It is central to our strategy of becoming the best bank for customers by making a wide range of improvements to the customer experience. As we enter the final year of the program, we have now delivered over 300 improvements, with a mix of heavy-lifting IT initiatives and a range of smaller but equally important enhancements.

“In the digital world, our strong online growth continues, with an increase in net new Internet banking users of over 750,000 in the last 12 months. We have over 4 million mobile banking users, and at the end of last year, we started to see mobile banking log-ons exceed those from the desktops for the first time. It's worth remembering that we had no mobile offering at all at the start of Simplification.

“In addition to day-to-day transactions, online purchases are also increasing. The 24/7 digital availability is a great advantage for our customers, and this was highlighted in the tax year-end of 2013, where 6,000 ISAs were completed online by customers in the 4 hours leading up to midnight at the end of the tax year.”

Fisher argued that improvements in customer experience are reflected in falling complaint levels and increased customer advocacy. Banking complaints are down to 1 per 1,000 accounts, 18 months ahead of a previously set target which has now been revised to 0.9 per 1,000 accounts by the end of 2014.

He added:

“At the brand level, at the end of 2013, Halifax stood at 0.8 complaints per 1,000, Lloyds at 1.1 and the Bank of Scotland at 0.9, all very significantly below other mainstream banks by their most recent scores. As a group, we have the lowest complaint level of any major UK bank, and we expect to maintain this industry-leading position.”

Global thinking

Now that the basic matter of survival is out of the way for Lloyds Banking Group - for now at any rate - the investment in digital would appear to be a sound one.

McKinsey & Company recently looked at banking customers changing digital needs. Its report relates specifically to the Asia-Pac region, but the lessons have global applicability.

McKinsey warned that banks which fail to adapt to consumer's changing digital needs could be risking as much as half of their net profits.

It argued that digitisation of services could create or destroy significant value for banks, which have been slow-moving.

On the plus side is the prospect of new digital services, cost reduction and potential market share increases.

On the negative side, there’s the danger of new or existing competitors achieving the first two and eating into marketshare.

McKinsey recommended:

  • setting up dedicated "digital SWAT teams" to drive and execute ideas quickly within banks' consumer divisions.
  • creating a shared centre to oversee digital activities across the business
  • potentially running an independent unit separate from the rest of the bank.

Of course it all demands investment and banks have been slow to spend on tech in the past.

A regulator from the Bank of England warned just last month that he felt a "very long way" from being able to say that UK banks have robust IT systems.

There may be some good news on that front if predictions from banking research firm Celent are to be believed. It reckons that global IT spending by banks will grow 4.4% to $188.0 billion this year.

On a regional basis spending by banks in Asia-Pacific will grow by 5.8% in 2014 to $66.5 billion, remaining relatively consistent in 2015.

North American bank spending will grow by a solid 4.5% in 2014 to $59.5 billion before growing 4.6% in 2015 to $62.2 billion.

Spending by European banks will grow 2.9% in 2014 to $62.1 billion, but will grow by 4.3% to hit $67.1 billion in 2016.


Let's hope if Celent's predictions are true that the money is spent wisely and well.

My blood pressure can't take much more of dealing with retail banking's creaking IT.

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