Showing posts with label National Australia. Show all posts
Showing posts with label National Australia. Show all posts

Thursday, 12 June 2014

Tesco Bank launches a current account - finally!

The news that Tesco Bank has finally launched its current/checking account six years after its split from RBS was announce must come as a great relief to Benny Higgins, CEO, and the rest of the team at Tesco Bank. Like expectant fathers they have been pacing the corridors of the maternity ward far longer than they would have liked. The delays have been numerous but principally down to getting over the regulatory hurdles and, more recently, ensuring that the IT systems fully work the way that they are meant to before being unleashed on real customers. Delaying the launch of the current account until the systems were thoroughly tested, while it was frustrating for those anxious to see Tesco Bank becoming a real challenger to the sector, should be recognised as absolutely the right decision for the CEO to take. The embarrassment and reputational damage caused to banks such as RBS and National Australia from having serious outages in their core banking systems far outweighs the benefits of launching earlier.

The announced current account is paying 3% on balances and only charging a monthly account fee of £5 if less than £750 is paid into the account. This is a competitive offer. There are added advantages for Tesco customers who will also receive loyalty Clubcard Points on all spending using the Tesco debit card.

Marks & Spencer beat Tesco out with a current account, having both free and fee-charging versions of their accounts. As with Tesco there will be benefits of being both a customer of M&S and its bank in terms of rewards. There will be some overlap between customers but the big difference is that Marks & Spencer Bank is owned by HSBC and therefore cannot really be seen as a challenger bank.

The launch of the current account by Tesco Bank should represent a real challenge to the big five banks (Barclays, Lloyds, HSBC, RBS and Santander). As an aside, Santander likes to position itself as a challenger but being owned by one of the largest banking groups in the world, coming from the consolidation of building societies (Abbey National, Alliance & Leicester, Bradford & Bingley being the main ones) and with a less than perfect reputation for the service it provides it quite rightly deserves to be clumped in with the other big 4 banks as being just another legacy bank.

There are many reasons why Tesco Bank should be seen as a real challenge to the established players. For starters it is not a small bank – it already has over 6 million customers using its insurance and lending products. All of these customers are potential customers for their current account offering. It also already has a large physical distribution network through its supermarkets. As they are available to savers today customers will be able to make deposits in 300 stores. However this account has been designed to be opened online and customer support will be available on the phone. The bank being designed for digital differentiates it from the likes of TSB, Metro Bank, Virgin Money and Williams & Glyn, which have all come from a traditional branch centric design.

Not only has Tesco Bank been designed from the start with digital in mind, Tesco also has many years experience of running large scale digital operations through its own website as well as operations like Tesco Mobile. This gives it a much better chance of delivering a reliable good customer experience than other challenger banks, particularly the small scale contenders such as Metro Bank, Aldermore and Atom.

Tesco Bank also has the added advantage that through its Clubcard programme it not only has vast amounts of data on both its existing and potential customers but it also has years and years of experience of using that data to drive business. Unlike the new start ups and the established banks so-called ‘Big’ data is not a new topic for Tesco. This should give it significant advantages given its customer insight in terms of providing customised propositions to its customers.

Tesco Bank is also not weighed down by legacy. They don’t have the reputational problems from the mis-selling of PPI and the high levels of complaints which the Big Five banks have. They can position themselves as truly a new entrant. While TSB and Williams & Glyn may have the liability for the past retained by their parents (Lloyds and RSB respectively) many of the executives who made the decisions to sell PPI, set the aggressive targets and the staff who delivered them are working for these ‘challenger’ banks.

They are also not weighed down by legacy systems unlike the Big Five banks, those spawned from the Big Five (TSB and Williams & Glyn) and those challenger banks who have been created by the acquisition of former building societies such as One Savings Bank (Kent Reliance Building Society) and Virgin Money (Northern Rock). While it may have taken Tesco Bank longer to get to market with their current account it is being delivered on (at least relatively) modern systems.

What the launch of Tesco Bank’s current account means is that there are now two sizeable challenger banks that are not tainted with the legacy of the financial crisis and that are serving their customers using modern technology platforms designed to work in the digital mobile world – Nationwide and Tesco.

Does this mean that the Big Five banks are quaking in their boots worried about their future? Clearly any bank executive should be aware of and taking into account what the competition is doing. The reality though is that for most customers banking is not that interesting, it is a commodity not worth spending a lot of time thinking about and that despite Seven Day Switching making it easier, they have better things to do with their time than switch bank accounts. This means that there will not be a flood of customers leaving the Big Five banks to sign up with Tesco or Nationwide.

The launch of the Tesco Bank current account is to be welcomed as a new force in the retail banking market, but no one should think that this is going to bring about a seismic change to who customers bank with.

Tuesday, 1 May 2012

NAB withdraws to the north - the end of innovation?



The announcement by National Australia Bank (NAB) that they are to close 29 of their business lending centres in the south-east of England and withdraw back to their northern roots, abandoning 80,000 customers, marks the end of an experiment initially started by John Stewart, then CEO of NAB, and more recently Lynne Peacock, until last year CEO of NAB in the UK.

John Stewart and Lynne Peacock worked together for many years at the Woolwich Building Society, where they were responsible for launching the UK's first flexible mortgage, the Open Plan mortgage, combining a savings account with a mortgage account, offsetting savings interest against mortgage interest. Ironically the Open Plan account was based on Australian flexible mortgages. Such was the success of the Open Plan account that Barclays decided to acquire The Woolwich and centre their mortgage business around their acquisition.

John Stewart was seen as an entrepreneur,leading Financial Services industry development and was subsequently hired by NAB to lead the business in Melbourne. He brought Lynne Peakock along, initially in Melbourne and then to lead the UK business consisting of Clydesdale Bank and Yorkshire Bank.

Once again, looking at how he could make a small player in a crowded market stand out from the crowd, he and Lynne Peacock came up with a strategy to take the strong Yorkshire Bank brand down to the sout-east and take on the Big 4 banks in their traditional territory. They came up with an entrepreneurial model where banks managers were allowed to operate like a franchise, to be directly rewarded for the performance of their branches, or Business Lending Centres, to be able to make lending decisions with less referral to the centre and therefore quicker decisions for customers. Their Business Lending Centres look like airline lounges, customers could use them to conduct their own business when in town, creating a very different customer experience. They even went so far as to organise 'speed-dating' for buinesses, whereby SMEs could meet other SMEs in order to do business with each other introduced by NAB. At the time  NAB was, once again, seen as leading the way in terms of a new banking model, of a new customer experience and indicating where the banking industry needed to go. The model was successful with the lending book growing at above market rates.

Many of the ideas that he and Lynne Peacock came up with have been emulated by other banks such as Handelsbanken (see http://www.itsafinancialworld.net/2012/02/who-said-branch-banking-was-dead.html , http://www.itsafinancialworld.net/2011/06/forget-virgin-money-or-metro-bank.html ), where the bank manager is master of his own business. NBNK in describing the type of banking they want to launch also describes something that is very similar to the NAB model. Metro Bank has gone some of the way towards this as has Virgin Money.

The reason that this has not worked for NAB is twofold. Firstly the focus was on commercial property lending. Since even before 2008 the commercial property market was overheating and finally burst, but like HBoS, NAB continued to lend and has, as a result, got a disproportionate amount of bad loans. Undoubtedly one of the reasons why the book grew so fast was because of the franchise model where the managers were paid in direct relation to the loans they made, which encouraged lending and discouraged caution. The second reason is that whilst NAB provided an excellent customer experience the customers were not prepared to pay for that. This is something that many banks face in a heavily commoditised market where there is the perception of 'free banking'.

In many ways it is a great shame (not least for all the people who will lose their jobs), that what NAB set out to do has failed. Certainly a number of the players, such as JC Flowers and NBNK, who have stated that they want to enter the UK banking market should consider whether acquiring the UK southern assets of NAB should be an option, rather than acquiring all of NAB UK.

Thursday, 24 November 2011

Barclays COOs/CIOs joined at the hip? ANZ doesn't agree

In an interesting move Barclays Global Retail Banking COO, Shaygan Kheradpir, has announced that the COO and CIO of each of the business units within the Global Retail Bank ( Barclaycard, UK Retail Banking, Barclays Africa and Western Europe) will jointly run their businesses and report to their CEO as well as to the GRB COO. This is sending a very clear message that, for retail banking, IT is as important as operations and that only by jointly working together can they succeed.

One can only assume that this is a move to change the behaviour often seen in banks where IT is seen as the whipping boy of Operations, the department that holds back the business from evolving and competing and the recipient of a lot of finger pointing.

In many banks and other financial services organisations IT reports into Operations and is not represented on the Executive Committees of their business units. This move by Barclays firmly places IT at the top table. It represents just how much more banks are dependent upon IT to be competitive.

Commonwealth Bank has gone one step further and has their CIOs reporting directly to the CEO, such do they see the significance of technology to the success of their banks.

Too often recently there have been tales of how IT has stopped the business working. You only have to look at the woes that National Australia has been enduring and the impact on the business of systems not working.
See http://www.itsafinancialworld.net/2011/04/deja-vu-as-nab-systems-down-once-again.html Interestingly NAB has a structure whereby they have split responsibility for IT between effectively BAU (Business As Usual) and New Technology with Adam Bennett as CIO and Christine Bartlett, the executive programme director of the NextGen technology upgrade programme.

However Barclays is clearly demonstrating how technology can help lead a business. First out with the tap and wave debit card in the UK and first out in the UK with the mobile wallet on a phone with their joint venture with Orange (see http://www.uswitch.com/news/communications/orange-and-barclaycard-launch-mobile-phone-payment-scheme-800550966/ )

For this joint responsibility to work effectively requires a special type of COO and a special type of CIO. The head of Operations will need to have far more than just an appreciation of IT than has traditionally been the case. Equally the CIO will need to have a deep understanding of how the business works and how IT can enable the bank to compete. Traditional CIOs who have come from an IT Service Delivery, focussed on keeping the lights on, may struggle to perform this role. The type of CIO required for banks is clearly evolving. This is discussed further at http://www.itsafinancialworld.net/2011/10/new-type-of-cio-is-required-for-todays.html
This dual leadership can only be seen as a temporary measure until enough executives emerge who can really master both banking and technology - people like Shaygan Kheradpir, whose last role was CTO at Verizon, and is an example of the Renaissance Man which is needed to manage banks in the 21st century.

In a move against the trend ANZ has announced that Anne Weatherston the CIO will no longer report directly to the CEO, Mike Smith, but will now report to Alistair Currie, the new COO, whilst still retaining her position on the management committee.

Shortly after the ANZ announcement Westpac has followed suit in going against the trend and has announced that they will not only introduce one COO but two and have a CIO reporting into each one, removing the CIO responsibilities even further from the CEO and the board.

Only time will tell whether either ANZ's and Westpac's or Barclays' and CBA's models are right. It will be interesting to see and costly for the banks that have got it wrong.

Friday, 14 October 2011

HSBC goes back to its roots

HSBC announced its return to its roots as a bank that supports international trade in the strategy announcement on May 11th. Stuart Gulliver, the new CEO and former investment banker, has firmly changed the emphasis back to becoming 'the leading international bank concentrating on Commercial and Wholesale banking in globally connected markets'.



Stuart Gulliver

Whilst the words may be modern, this is what the bank was first set up for in Hong Kong in 1865. Supporting international trade alongside the Taipan at Jardines. 'globally connected markets' are the twenty first century words for what is essentially trade routes, though expanded beyond commodities and goods to include money. So when you look at the US and Mexico or Germany and Turkey, as well as the large amount of trade flowing, you see large quantities of money flowing across borders sent by entrepreneurial immigrants back to their families, the strategic value of being in these geographies makes abundant sense.

'Becoming the world's leading international private bank' is also a return to the original roots. Support the international trading companies and support their owners - again what the original HSBC was set up to do for the taipans living on The Peak. In addition with the focus on Wealth Management HSBC is ensuring that as the entrepreneurs acquire their wealth there is a route to climb up to the exclusivity of the Private Bank.

The real change of focus is on 'limiting retail banking to those markets where we can achieve profitable scale', but who can argue with the cold logic of that? What it does mean is that questions are undoubtedly being asked as to whether the use of the strapline that has been so successful and has won so many awards, 'The World's local bank',  will still be valid, unless of course your definition of 'the world' is restricted to the number of focus countries, considerably less than the 80+ countries that HSBC currently operates in.
With the announcement of the sale of its Hungarian retail banking operations to Cofidis Magyarorszagi Fioktelepe, the sale to Itau (the Brazilian bank) of its Chilean retail operation and discussions underway for the sale of its small (11 branch) South Korean retail bank, the strategy of withdrawal is in full execution.

However it is not all about withdrawal. In Australia HSBC has opened its 31st retail branch as it builds its presence there. Whilst there is an increasingly large and affluent Asian population which HSBC will be attractive to it is difficult to understand how this fits in with HSBC's strategy to focus on markets where it can grow a significant presence given the dominance of the 'Four Pillars' - Nab, CBA, ANZ and Westpac in Australia. 

HSBC has clearly made some diversions from its original path along the 146 years that it has been running, not least of all the move into the subprime market with the acquisition of Household in the US (the remains of which is now subject to review and may results in the selling of all or part of the cards and retail banking businesses), but it is to be welcomed the statement of intent to move to a 21st century version of what it was originally set up for.


Wednesday, 4 May 2011

Why the Big 5 banks should be pushing for the end of 'free banking' (and the government shouldn't)

With the ICB (Independent Commission on Banking) looking at increasing competition in the retail banking sector, examining the market share of the big banks and overall looking for greater fairness and transparency in charging, strongly supported by the likes of Vince Cable and other politicians, increasingly it looks as if the end of 'free banking' is in sight. Of course 'free banking' doesn't really exist, rather it is a mirage in that rather than paying directly for the services provided, consumers are made to pay by low or no interest rates for money deposited in current accounts, low interest rates in deposit accounts, high mortgage rates and even higher overdraft charges. As consumers baulk at the costs charged for loans and going overdrawn and politicians continually call for fairer, transparent charges, the inevitable conclusion is a banking system where customers pay for the services they use.

Being able to charge a direct amount for the services they provide would bring some significant advantages to the big banks in the heavily regulated environment that they are increasingly operating in. When there is more focus on the market share that each of the banks has, and where more market share is seen as bad, then the banks will want to focus not on the absolute market share but the quality of the market share.

All of the big banks today have customers that they don't make any money from. These will be the types of customers that open a current account for their household money, for their book club, for their children, where the balances are low, transactions sizes are small and they have only one product. If market share is going to be restricted then these are the customers that the banks are going to want to be shot of. The problem is that in today's banking environment it is very difficult for a bank to fire customers. However if customers were made to pay directly for the services that they use then it would be far easier for the banks to adjust their charges to either makes the low balance/low transaction value customers profitable or, better still for the banks, to encourage those customers to take their business elsewhere.

With four out of the five big banks now being run by investment bankers not retail bankers, and Barclays, HSBC and Lloyds Banking Group focussed on a strategy of raising their Return on Equity (ROE) up to at least the 14-15% range, then there is clear evidence that making customers pay directly for the services they use can help achieve this. In Australia where this model has existed for many years, The 'Four Pillars' (National Australia, Commonwealth Bank, WestPac and ANZ), have in the past enjoyed ROEs of 20+%. Even with tougher regulation they are each expecting ROEs of around 16%, significantly higher than any of the UK banks.

However whilst this all sounds very attractive for the big banks, it is not great for the new entrants, who will struggle to compete with the scale advantages that will allow the big banks to make their charges attractive for the customers they want. It also raises the big question of who will provide the banking services to the customers that the big banks don't want? It has the potential to significantly increase the number of the unbanked. As the likes of Vince Cable continue their crusade against the banks and push for ever more transparency of charging for banking services, the politicians need to be wary of the consequences of getting what they wish for.

Friday, 15 April 2011

Deja vu as NAB systems down once again!

National Australia once again had its payments systems crash last night meaning that salaries weren't paid and payments between Nab and the otrher Australian banks are not being made. This comes after a major outage last November which lasted over a week see  http://www.itsafinancialworld.net/2010/11/these-things-happen-says-nab-ceo-after.html , http://www.itsafinancialworld.net/2010/12/nab-systems-down-again.html  and  http://www.itsafinancialworld.net/2011/01/nab-loses-systems-for-third-time.html . It would appear that the original issue is still not resolved.

As governments around the world look to ring fence retail banking so that should another crisis happen the core banking of paying individuals and consumer deposits are protected, such outages as these should be a higher priority for without the confidence in the resilience of basic banking ring fencing retail banking becomes an irrelevance.

In a reflection of the Bank 2.0 world we live in, NAB did at least inform customers via Twitter and Facebook of the problems and the progress on fixing the problem. All credit to NAB for their use of social media, but a focus on getting the basics right has to be the number one priority now.

Monday, 31 January 2011

UPDATED: NAB loses systems for third time

To paraphrase Lady Bracknell (once again)  - to lose your systems once maybe regarded as a misfortune, to lose them twice looks like carelessness. What the poor woman would have said for losing the systems for the third time is unprintable.

On the first ocassion the systems were down for over a week (see http://www.itsafinancialworld.net/2010/11/these-things-happen-says-nab-ceo-after.html ).

The second time was much shorter for less than hour (see http://www.itsafinancialworld.net/2010/12/nab-systems-down-again.html# ).

This time access to internet banking was down for most of Monday 31st January, with the notice to use phonebanking leading to disappointment as that too was down for the morning.

In this day and age, with the increasing dependency by businesses and consumers on online, real time banking, unreliable systems are not only unacceptable, but could lead to significant customer defections. Whilst glitches with systems will occur, having adequate redundancy built in, well-thought through contingency plans and sufficient capacity to meet the surge of demand when systems return online are not optional features for any commercial business let alone a bank.

National Australia has announced some time ago that it is outsourcing its IT to IBM, let's hope for all its customers that this results in an improvement in systems reliability.

In a further update it has been reported that this was not the only problem that National Australia Bank has had in the last few days  - at the weekend and yesterday they suffered 'technical problems' when thousands of customers received old SMS messages and emails about their accounts.

Apparently  8000 to 10,000 UBank customers, a NAB brand, were resent old text messages and emails about their accounts.

One customer received 21 text messages telling him thousands of dollars were being moved from his account when, in fact, none had. Mr Wright said text and email messages were duplicates of messages they had previously received.

When will National Australia Bank's woes end?

Wednesday, 8 December 2010

NAB systems down again!

To misquote Lady Bracknell 'To lose one's systems once may be regarded as a misfortune. To lose your systems twice looks like carelessness!". National Australia's systems went down again earlier today (their afternoon) taking out electronic payments systems including ATM and POS and internet banking. This time, however they were able to restore the systems after only an hour. According to National Australia the two incidents were unrelated, however it sounds that a much deeper dive into what is going on in IT is required than the review by their auditors KPMG.

Bank of Ireland follows NAB in systems crash

You might think it was catching, but following National Australia's payments systems crash (which has still to be completely resolved two weeks after ocurring - see "These things happen" says NAB CEO after payments system crashes), Bank of Ireland's systems crashed yesterday preventing customer access to their cash accounts. ATMs and Point of Sales systems were impacted both in Ireland and in Post Offices across the UK. It's reported that the problem has largely been resolved, but that the amount of cash that can be withdrawn from ATMs might be restricted. Bank of Ireland said the problem was due to an "unforeseen technical issue".

We can all take some relief that it wasn't due to a "foreseen technical issue". Of course in comparison to National Australia, Bank of Ireland was able to recover their systems far more quickly and with far less impact on their customers. However should there have been any impact on customers? The criticality of ATM and POS systems and the impact on customers of any failure is such that these systems should be designed and built with a high level of redundancy and the ability to failover instantly without any impact on customers. This clearly wasn't the case for Bank of Ireland.

The Bank of Ireland systems are currently outsourced to Hewlett Packard. Perhaps it is telling that only last month Bank of Ireland announced that that contract was not being renewed and was going to be transferred to IBM.