Lloyds Banking Group reveals the complexities behind digital simplification

Profile picture for user ddpreez By Derek du Preez June 10, 2014
Summary:
Director of Channels Julie Perkins was speaking this week at PegaWORLD in Washington DC, where she spoke about over-spend and the importance of getting the right skills on the ground.

Lloyds Banking Group is the largest financial institution in the UK, where it has a relationship with one in two British residents. Over the past few years the

Lloyds Bank
bank has been going through an important transition, both in terms of dealing with the shock of the financial crisis and the acquisition of Halifax Bank Of Scotland in 2009.

A large part of this transition has involved working to simplify its business processes in a bid to not only become the “best bank for customers”, but to also prepare for operating in a digital age. However, although its £2bn Simplification Programme has been well publicised and branded a success by the bank, it hasn't come without its problems. Lloyds' director of channels, Julie Perkins, gave an honest presentation this week at PegaWORLD in Washington DC, where she was keen to share her experience of the challenges in getting a such a huge and complex organisation to simplify.

Perkins began by explaining that Lloyds, with the variety of brands it represents, has an incredibly diverse technology landscape. The bank has approximately 43 platforms which support over 600 business processes. Not only this but the bank has traditionally relied heavily on paper to complete transactions.

For example, a customer walking into a branch would likely have to fill in information on a paper-based form which would then be picked up by a van and driven elsewhere to the bank's scanning facilities. Hardly a digital end-to-end experience. Perkins started this journey with zero resource and at a time shortly after Lloyds offered employees the opportunity to apply for new roles. This meant that she had missed the opportunity to second experienced and knowledge staff. She said:

“Getting the right capability on the ground from scratch caused us issues, we couldn't disrupt what was going on and we lacked Lloyds knowledge. I would like to say its all written down, but a lot of the stuff is in people's heads.”

However, over the past few years Perkins has managed to build up a centre of excellence within Lloyds and now before any new projects begin she ensures that the capabilities and skills are available by getting all those working on the project – Lloyds, global partners, systems providers – to sign off on what resources can be made available. She now has 15 SMEs supporting the simplification programme, has made a number of experienced hires (which is challenging in a market that is dominated by contractors), is retraining employees and has brought in a number of apprentices. She said:

“Now when we start any project, we as an organisation decide how we are going to solve the problem. We no longer start any project until we have the right technical capability on the ground.”

Design and planning – with a bit of overspend

Perkins explained that working on the simplification programme and getting the bank's processes in order was like working for a start-up within an organisation that doesn't lend itself to the start-up way of thinking. However, she began by approaching the business and finding out how her colleagues would ideally like to work. There were three general approaches:

  • Straight through processing – this was described as the 'nirvana' and would be a digital solution that would be fully automated and end-to-end.
  • Semi-automated – self explanatory. Some of the parts of any transaction completed on digital platforms, with perhaps some human intervention where necessary.
  • Expert handling – still essential in an organisation like a bank, where some processes require the human touch e.g. bereaved clients.

It was established that Pegasystems 6.2 would be used for Lloyds' Business Process Management and for its Straight Through Processing of transactions. Perkins then set out on establishing how many processes the bank had (over 600) and found that, unsurprisingly, 80 percent of employees were working on just 20 percent of these. This gave the simplification team a starting point. However, Perkins was aware it wasn't going to be easy. She said:

pegasystems
“This gave us a focus on where to re-engineer. Processes were selected on the basis of business benefit, without much thought about complexity. We initially didn't have a team, didn't have a platform, didn't have the operational controls and support teams, and the business asked us to re-engineer the most complex processes.”

However, Perkins described how Lloyds began on a journey of delivering 20 deep process transformations and 50 enhancement releases – making straight through processing a reality for Lloyds customers and its employees. She said:

“We haven't quite finished the simplification programme, and although we feel that the journey we have had has been difficult, we are overcoming this and delivering real benefits to the business. We have increased straight through processing and we won [this programme] by systematically picking off our challenges and building a centre of excellence within the Group.”

However, Perkins recognises that this has come at a cost. A higher cost than she or Lloyds would have hoped, which she said has disappointed some colleagues. Although she didn't go into the specifics of how much has been spent to date, she said that they based their initial estimate on the fact that the 43 platforms within the bank were very mature and operated by established teams, which each gave an estimate of their costs for the programme. But what Perkins and her team underestimated was the integration element. She said:

“Cost of delivering an end-to-end process was underestimated. We naively got all the separate quotes and estimates and added it up. We didn't take into account the cost of hanging those things together, the end-to-end piece. We should have quoted more.”

Better communication with the business

Lloyds is now nearing the end of its Simplification Programme, and is set to launch Simplification 2.0 next year, where it will look to further enhance its business processes, deepen digital integration with the back-end systems and upgrade to Pega 7.1. However, one thing that Perkins said she needs to improve on, which has become a focus for her team, is communicating to the business and her colleagues what they are actually getting and why it is better.

She provided an example of how last year in the UK, regulators mandated that the banks had to make it easier for customers to switch their banking accounts across to other banks – requiring that the process from moving from one bank to the other take no longer than seven days. Perkins said that this project was challenging for a number of reasons, but that when it went live the switching team in Andover had a skewed perception of how bad things were. She said: 

mobile banking and finance © Oleksiy Mark - Fotolia.com

“We didn't talk to our colleagues about what they were going to get. Because of the challenges and the requirements that the regulators had given us were unstable, we ended up with an imperfect project. We knew that, but we put it live. We went to Andover where one of the teams is placed and said it's mostly workable, it's a bit cumbersome, but we will fix that. 

“All of the colleagues in Andover were very unhappy with what they had got and that's because they thought everything was broken, but actually what they didn't see is that 85% of the cases are going straight through. You never see them. We needed  to bring our colleagues on that journey with us.”

Verdict

  • A complicated project that is far from over. Lloyds is spending hundreds of millions of £ on this and it highlights the importance of digital for organisations that are having to grapple with their legacy systems. It was refreshing to hear someone working for a financial institution give such a frank assessment of the challenges involved in simplifying for digital, but only time will tell if it all pays off.