Lloyds Bank earlier this week announced a major strategic shift, pumping £1 billion into digital transformation of its business by 2017.
On the frontline of this major evolution will be Miguel-Ángel Rodríguez-Sola, Group Director of Digital, Marketing & Customer Development, at Lloyds Banking Group. He argues that a key factor in successful delivery of this ambition is to keep the customer at the centre of the plan:
While digital has changed banking, our customers' needs have not changed. They still want to save for the future, buy a home or protect their families. What is changing is how they want to interact and fulfill those needs with us. We expect that by 2016, e-commerce will account for 25% of overall business turnover in the UK.
UK banking mirrors this strength. Digital retail banking sales across the sector, excluding savings, have increased by 16% over the last year. Over 14 million banking apps have been downloaded to date and GBP 1.7 billion are transferred weekly via mobile in the UK. This is a massive change.
Lloyds can in fact already boast some impresssive digital credentials:
- Over the last 3 years, it has invested over £750 million on digital initiatives.
- The group has circa 20% of the retail digital market share of new growth, above the average market share of 18% .
- The bank has 10 million active digital customers.
- With 5 million active mobile customers, Lloyds claims to be the largest digital banking franchise in the UK.
- Customers logged on over one billion times over the last 12 months.
- Lloyds transacts online over £1.5 trillion for commercial clients per year. (That’s roughly the same size of the UK GDP.
- Lloyds has the top-rated banking app both for retail and business banking customers in the UK in the Apple AppStore.
- Over 40% of customers' simple needs are met online.
- Some 40% of direct mortgage product transfers now take place online and 90% of all commercial client payments.
- Close to 85% of customer account servicing is now conducted digitally, such as making a payment or checking a balance.
What’s changing now is that the digital transformation will be the bedrock of the entire corporate strategy, not as standalone initiatives. Rodríguez-Sola says:
Lloyds Bank sees digital as part of a much broader multichannel approach, one that allows us to meet customer needs wherever and whenever they choose. For the customers, it's about choice and convenience. For the bank, it's about creating the opportunities to meet additional needs, improve service and save cost. Put simply, multichannel customers hold on average 27% more product with us and they interact 5x more with the bank.
There has been a 50% reduction in the time taken to serve some simple customer needs. Our customers have decided to go paperless. 14 million accounts are now enrolled in paperless statements. Imagine the convenience for our customers and efficiency savings for us. As we have said, multichannel drives customer benefit, growth opportunities and business efficiency.
Rodríguez-Sola predicts that customer behaviors will continue to change and at an accelerating rate:
By 2017, we could see 60% of simple needs and 10% of complex needs met digitally. Our customer's first ISA might be opened in a branch, but it will be managed online. Today, more than 50% of our customers are already doing so. By 2017, we expect 90% of simple service transactions to take place online.
Our ambition is also to grow digital market share. Digital represents a significant growth opportunity for us in areas like cars, personal loans and insurance, where we are below our natural digital market share.
At the heart of this transformation is a relentless emphasis on customer-centricity and the new relationship that digital creates between bank and clients. Rodríguez-Sola explains:
The trick is going to be making sure that critical ‘life moments’, such as buying a house, setting up a business or even just opening a bank account, are made simple, fast and customer-friendly. To that end, Rodríguez-Sola pledges:
Digital is a gateway between customers and the bank, and it's a gateway that transforms our ability to manage the customer relationship. For the customer, it provides a convenient front door into our proposition and services. For the bank, it creates the opportunity to present highly personalized offerings to customers and clients based on an integrated view of their needs.
For retail customers, [customer centricity] is about completing all of our servicing journeys online and enabling 100% of simple purchases online, providing anytime, anywhere choice and convenience. At the same time, we will give customer access to more complex products, like mortgages or debtor protection. You can expect significant focus on mobile propositions.
For commercial clients, the end goal is similar, creating a single, consistent digital front door that allow them to transact and service, from cash management and payments to trading and FX. Next year, we will launch our new strategic online channel for our commercial clients that will support our growth strategy in commercial.
We will transform the 10 most important customer journeys over the next 3 years. The 10 customer journeys we are planning to digitize include taking on a new mortgage, on-boarding a new business relationship, opening a personal current account or preparing for retirement.
The benefits for the customers are clear. In the case of buying a home, the time required to reach a mortgage offer could go from 25 days to 1 week. Customers' accounts will have fewer touch points, which will simplify the experience for customers.
In Commercial Banking, business account opening could reduce from 6 weeks to only 1. Finally, Insurance could move from almost limited online servicing capability to circa 70% of service needs being met online.
Digital will bring a massive transformation to current customer journeys, providing significant benefits to them. It is all about doing the right things for customers, anytime, anywhere self-service with less errors, seamless experience across channels and contextual, relevant propositions for our customers.
There are also hard cash benefits to all this customer-centric thinking, he adds:
Doing the right things for customers carries growth opportunities and significant efficiency improvements for the bank. For the processes that we want to digitize, we estimate a future reduction in end-to-end cost of around 15% to 35%.
The customer and the client in commercial is more engaged with the bank, 30% more products, more interactions. These customers on average transact 5x more with you, have 3 average times more balances and are more profitable for the bank.
Over the last 3 years, Lloyds Banking Group has built the largest digital banking franchise in the UK and we are not stopping there.
As someone who's been on the receiving end of Lloyds current brand of 'customer-centricity', I have say that there's a lot of work to be done here!
But leaving aside my own experiences, the fundamental truth of what Rodríguez-Sola is saying is correct: without having an absolute obsession with keeping the customer's needs at the heart of this digital transformation, it will be £1 billion down the drain.