So, what’s going to be different? Is the new Group Chief Executive going to continue with the strategy set out by his predecessor or will Charlie’s world be different? And if it’s going to be different, what might that look like? Mr. Nunn has said that he wants to get to know Lloyds Banking Group first – he’s set off on a whirlwind tour of the bank – before any new strategy is announced next year.
The feedback from members who have met him is very encouraging, with many calling him a breath of fresh air. You couldn’t imagine the previous Group Chief Executive letting you watch him play tennis! But members shouldn’t be taken in by the soft-focus videos – “Am I still on mute….” – because the image belies someone determined to create a ‘digital at its core’ bank focused on leveraging technology to drive profits and share price growth. If he can achieve both of those then he will be significantly more successful than his predecessor who failed in both areas. We’ve said repeatedly that Lloyds will get bigger – in terms of profitability – by becoming smaller and whilst branch numbers will continue to fall, some of the biggest costs savings in future will come from non-branch areas.
One of the most significant changes to the way Lloyds will operate in future has already been made. The new Chief Operating Officer, David Gledhill, was instrumental in transforming the Development Bank of Singapore (DBS), Singapore’s largest bank, to become rated as the best bank in the world in 2019 and 2020. In 2018 it was voted the best digital bank in the world. And all of this was driven by a strategy designed to take a medium sized multinational bank with 26,000 employees and create a technology company, that just happened to be a bank.
We are not saying that Lloyds is going to follow the exact same path. The two banks are worlds apart, both in size and complexity, and are starting from completely different positions but the vision of a digital at its core, technology driven bank with a cost to income ratio of a Fintech or Challenger bank would be the ultimate North Star for Lloyds.
When he sets out his new strategy Mr. Nunn needs be up front with staff about what it’s going to mean for them both in terms of jobs and career prospects. The constant reorganisations, with staff having to apply for their jobs every year and the ever-present threat of redundancy needs to stop. It’s debilitating, time-consuming, wasteful and, most importantly, bad for morale. It doesn’t create an experimental or risk-taking culture, which is what he’s going to need to be successful. Mr. Nunn must set out how he’s going to help staff move to the new world and that means up-skilling and developing those staff that want to stay.
Digital to the Core
If it’s to become truly digital, Lloyds needs to jettison its core legacy IT systems. Members will be aware from previous Newsletters that Lloyds has invested £tens of millions in Thought Machine’s ‘Vault’ system. But the implementation of ‘Vault’ has been plagued with problems and is well behind schedule. The Transformation Director for Project Voyager, the implementation of Thought Machine, left the bank at the end of September. Whether that’s to do with the problems with the project we’ve already reported on is anyone’s guess. The bank reported to analysts a few months ago that it had only managed to migrate 120,000 customers to the new Thought Machine platform and not the 400,000 originally planned. The question for Mr. Nunn and Mr. Gledhill is are they prepared to put in the investment needed to make ‘Vault’ a reality. If not, what’s their alternative proposal? It’s simply inconceivable that Lloyds could aspire to be a digital, technology driven bank with a core banking platform that’s older than me.
DBS has the world’s largest banking API platform (Application Programming Interface – software intermediary that allows two applications to talk to each other) with over 450 interfaces that allow customers to access different marketplaces for cars, property, electricity etc. You couldn’t do that on the Lloyd’s legacy platform.
Another question is how much of Lloyds’ technology is going to be managed by third-party vendors? In a case study interview for Singapore Management University (‘DBS: Digital Transformation to Best Bank in The World’) Mr. Gledhill said: “When I arrived at DBS, we were outsourcing 85% of our technology services. We had a bunch of our technology people signing contracts and managing members; we were doing contract management, not building technology”. By the time he’d joined Lloyds, 90% of DBS’s technology was insourced and self-managed.
Will Lloyd’s go down that route and insource technology or will it continue with its current approach? All of these questions, and more, need to be addressed by Mr. Nunn when he announces his strategy next year.
Banking staff have been warned that the FCA could make home visits as the regulator sets out its response to the widespread adoption of hybrid working models across the financial services industry. It’s also announced that financial services companies will have to have their hybrid working plans assessed and signed off by the FCA before they can be implemented.
The FCA says: “We should be able to access firms’ sites, records and employees. It’s important that firms are prepared and take responsibility to ensure employees understand that the FCA has powers to visit any location where work is performed, business is carried out and employees are based (including residential addresses) for any regulatory purposes. This includes supervisory and enforcement visits”.
The likelihood of the FCA turning up at the front door for an unannounced visit is very unlikely for most Lloyds staff. However, there are some Lloyds staff who are doing sensitive roles and they could be subject to such visits. BTU will be discussing the FCA’s proposals with it directly and will keep members informed of any developments.
Members with any questions on this Newsletter should contact the Union’s Advice Team on 01234 262868 (choose Option 1).