Case Studies
Can Banks change fast enough?
Financial
institutions have changed massively since the industry was deregulated in
the 1980s - all driven by increased competition. Modern company structures
have metamorphosed, driving down costs. Competition continues to grow however.
The new challenge is how to increase information flows and develop effective
systems to maximise returns.
In the 1980s, deregulation brought companies such as BT and BP into the money
markets, lending to other businesses and undermining banks' market share.
Today, high street stores are extending the concept to include consumers.
Sainsbury's bank, Tesco's credit card, Virgin insurance and Marks & Spencer
PEPs are squeezing the traditional financial sector further.
The fight-back focussed mainly on IT investment and restructuring. For example, Gene Lockhart's arrival at Midland Bank (now HSBC) in the late eighties initiated IT transformations worth an estimated £3 million annually. Data processing functions were centralised away from high street branches to huge national processing centres, slashing operating costs. (Many banks now outsource this activity, using outfits like EDS to clear cheques or process accounts, reducing mainframe computer costs.)
IT also enabled new banking concepts to emerge such as 'First Direct', introduced by HSBC as the first telephone banking service. These have now been further enhanced through the introduction of on-line banking. Using either the Internet or direct-dial Intranet facilities, a number of high street banks - HSBC, Royal Bank of Scotland, Barclays and National Westminster - are now offering clients the ability to view and download balance and recent transaction details. Enquiry and message services are provided through e-mail and bill payment instructions can also be processed.
Competition within the traditional financial sector intensified too. Banks offer mortgage and insurance products while Building Societies have converted into banks. (The number of large building societies in Britain has halved in just five years.) Consumers take out Alliance & Leicester Plus bank accounts as easily as Lloyds mortgages. Financial services have homogenised into all-under-one-roof "financial boutiques".
Mergers and acquisitions have increased market power. Deals in recent years include HSBC, Lloyds TSB, HFC Bank and Beneficial Bank. Combined customer bases with greater assets mean larger funds can be raised and lent. Duplication of branches leads to downsizing and reduced network overheads. More is achieved for less.
The pared-down high street branch is now in essence a distribution channel - a sales centre in competition with peripatetic sales reps, key account agents and now retail outlets.
The critical issue facing banks is information flow. Sales staff must be aware of latest product data or of maturing policies as leads for repeat business. Managers must also be able to track progress against key performance indicators, while accountants analyse the profitability of each product and distribution channel to establish budget allocation.
Through data warehousing, much of this information is already available, but it is not yet reaching those who need it. New infrastructures and control mechanisms are required to maximise the use of laptops, ISDN and the Internet. Staff must be trained to implement new procedures fully and uniformly.
As one client in the financial sector, Neil Murphy of Close Investments, recently said, "Using SYSTEM 21, it is possible to accelerate the achievement of strategic objectives throughout the organisation."
Our involvement represents an additional resource, freeing up managers to remain focussed on the business, while the change process takes place. In addition to re-engineering and offering support and training, we also source appropriate IT solutions, ensuring the integrated design and introduction of all new systems.