Sixteen years ago HBW wrote a number of articles on strategies for different parts of the Banking Framework.  This article takes a review of what was said in the article Banking Operations Strategies and Technologies and links to an updated view of where the industry is going (click here).  It is broken in to three parts;

  1. What was the Banking Operations Context then and what happened in the sixteen years that followed?
  2. What of the then proposed strategies happened and what did not?
  3. What did HBW miss?

What was the Banking Context in the UK in 2003?

The banking biodiversity was quite different to that of today;

  • There were four big bank groups (which still exist today).
  • Challengers (e.g. Nationwide, Co-op, NAG, HBOS).
  • There were quite a few ex Building Society Banks (e.g. Alliance & Leicester, Abbey National, Bradford & Bingley, Northern Rock, Brittania, Birmingham Midshires).
  • There were a number of internet only banks (e.g. Egg, Cahoot, IF, Smile, Wingspan).

The banking biodiversity shrank down to the major banks plus a new addition to the major banks in the form of Santander and the challengers.  The ex Building Societies and the internet only banks were gobbled up by the big bank groups.  Biodiversity reached a low point in 2009 and then started increase.

  • New challengers (e.g. Metro and TSB).
  • Technology led new entrants (Starling, Monzo, Tide, Oaknorth, N26 etc. etc.)

The technological changes that happened in this time period are;

  • The arrival of contactless payments.
  • The mass adoption of mobile, specifically smart phones.
  • The introduction of faster payments and essentially real time movement of money.
  • Social media adoption and use as a megaphone for customer dissatisfaction and complaints.[1]

The other big change in that time has been the public’s attitude to the banks.  They have been caught out behaving badly; they had been mis-selling products (e.g. PPI, derivatives to small businesses) and using pricing policies that punish loyalty (e.g. teaser interest rates, annual premium increases for loyal/ inertia customers).  This has caused the regulators to be much more interventionist on the customer’s behalf.

What of the then strategies happened and what not?

Click here for the original description of what we believed the strategies and technologies were for banking.  We evaluate them against what happened and whether they are still relevant ideas.  The ideas were broken into 3 groups;

  • Banking Operations Business Design Ideas
  • Business-Technology linking Ideas
  • Technologies being invested in.

Banking Operations Design Ideas

Banking Ops Design Idea Adopted (Y/N) Commentary Still Current (Y/N)
Centralised and specialised processing deliver economic efficiency in Financial Services Groups Y This happened.  There are now specialised Bereavement teams, vulnerable customer teams, mandate centres, financial crime units etc, etc.  General purpose staff in banking and call centres are diminishing rapidly. Y
Financial Services Groups will be less vertically integrated with much more activity outsourced. Y(ish) Banks have outsourced a lot, but not in the way expected.  Apart from cheque processing and credit cards very little in the way of industry utilities have developed.  The banks seem to have entered into bilateral contracts with outsourcers (HP, FIS, IBM, Accenture etc) who have not been able to create genuine Multi-Bank utilities. Less so.
Product processing engines will be brand indifferent Yes and No The expectation was that Banks would run multiple brands off the same engines to get economies of scale (whether in-sourced or outsourced).  This has happened up to a point for big brands at RBS and Lloyds but lots of smaller brands in these groups are not on the core engines.  Also, the lack of outsourcing and difficulties/ risk of migrations has stopped it in others.  Finally some groups do not have multi-brand strategies. No; too hard.
Don’t mix sales and service Yes This has happened.  It has been reinforced by the increasingly regulated nature of sales.  Routing technologies in call centres and in websites make it easy to separate the two for customers. Yes
Clearly separate service and processing and make service multi-product. No We got this idea wrong.  We thought banks would put in a service layer to protect customers from having to find the right part of the bank and deal with easy issues.  In practice customers can use the web and call centre routing to get directly to the team they need. No

Business-Technology Linking Ideas

We also thought there would be five technology linking ideas; ones that connect Banking Operations Strategies to Technology trends and opportunities.


Technology Linking Idea Adopted Y/N Commentary Still Current (Y/N)
Only electrons move in a bank Y The idea was the removal of paper from the processes.  This has largely happened with image and workflow technologies; customers completing forms online and taking “selfies” for ID purposes.  There is still a lot of efficiency to be gained from handling electronic (PDF) paper better. Yes
Simple CRM for Customer Contact Y++ CRM has been the object of several, often unsuccessful, waves of investment, but in the digital age and the times of AI/ business analytics, its use in analysing and improving operations has been on the increase. Been over taken.
All forms will be  electronically completed, preferably by the customer. Y All banking groups put their forms on their public websites.  These forms have varying levels of “smartness” about what the core systems can do with them.  We have not reached the stage where banks accept digital signatures or other forms of digital authorisation for all forms; inside a banking app, they are considered authenticated. Yes
Legacy software will be an important Design Point. Y It’s a key constraint, to the point of bitter frustration, on the part of bank management.  The improvements we anticipated have not happened.  The legacy software problem has got worse. Yes
Web Browser to bring together lots of systems on the desktop. Y++ It is hard to imagine anything other than a browser for Banking Operations but back in 2003 there was a lot of “fat client” software in banks.  Browser technology has allowed third parties’ SAAS offerings to contribute to Banking Ops as well.

We should be careful though as we are re-inventing the “fat client dilemma” with mobile apps.

Yes but NB mobile Apps.

Technologies being Invested in

Finally we thought there would be 5 Technologies of importance to Banking Operations;


Technology being inserted in Adapted Y/N Commentary Still Current (Y/N)
Image Processing Y Fax Machines, at last, are a thing of the past.  Also Banks are starting to use customer mobile phones as image capture devices.  The processing inside Banks still leaves a lot to be desired with lots of manual keying based on electronic images. Y
Browser technologies Y For Internal Applications Web Browsers are the design point of choice.  Legacy Dumb Screen and “Fat Client” applications can be wrapped in technologies such as CITRIX to present them in Browsers as well.  In customer facing systems, mobile first is the design point. Y although mobile is now more important.
Email is a wider used technology N We expected email to be the core of workflow.  We were wrong.  Purpose built workflow, process automation and case management technologies are much more common.

Banks needed higher levels of control and security than was feasible with email boxes.

Gradual break up of legacy banking software N Sadly, this has not happened, if anything, the situation is worse now as new software layers and interfaces have been added and knowledgeable people have died, retired or moved on.  All the big banks have the same core systems as fifteen years ago.  This issue is being systematically kicked down the road by each generation of C-Suite. Y as an issue but low as a priority.
Package Software A bit, not much Various big banks have tried to implement core banking replacements and pretty much all have failed.  All were based on packages.  Package software has been used for mobile Apps and Internet Banking, but after a while, banks have mostly brought the functionality in-house with re-writes.  Smaller banks, private banks and international banks are all much more likely to use package software. Yes

What did HBW miss?

We at HBW are only human and so a good bit of what happened from a Banking Operations and Technology point of view was not foreseen by us.  Key things we missed out on were;

  • Change goes much slower than you ever imagine. Most of the ideas above are still relevant today; sixteen years later we would have expected the Banking Operations and Technology world to have looked a lot more different than it is.
  • Contactless really is putting a dent in cash at an incredible rate. The industry has finally come up with a convenient way of making electronic payments to replace cash.  A large body of cost of big banks was taken up by cash handling; in branches, security transport, cash centres, ATM networks etc.  Contactless will drive down these costs.
  • When the article was written, the Smart Phone had not been invented. The ubiquity of Smart Phones and their ease of use has removed a huge amount of work from branches and operations centres as customers are willing to, and prefer to, carry out activities on their Smart Phones they would not have done online.
  • When the article was written, Facebook had not been invented. Social media does not directly affect Banking Operations but acts as a very large magnifying glass and fast feedback loop on customer service.  The result has been to make large banks much more risk averse when it comes to change.
  • HBW did not imagine that some of the leading banking technology and models would develop outside Europe and North America. Developments in China in particular are causing major re-thinks on how banking is delivered (think the AliBaba and Wechat ecosystems).

[1] The author worked with a bank in the late nineties where the entire (branch) network was out of action for a week.  No press articles were published.  Eighteen years later a much lesser incident at TSB caused the resignation of the CEO and questions in the houses of parliament – this was driven by the noise in social media.  Such noise has made banks much more risk averse.