Starting over: Lloyds Banking Group’s transaction banking ambitions
While a great deal of attention has been given to Lloyds Banking Group’s retail operations as its various elements are split up, less has been given to its activities in transaction banking, where it has been quietly working to transform itself and its customer offerings for the past few years.
The bank is now “one year into a three-year journey”, says Ed Smith, managing director of Global Transaction Banking (right). At the end of that journey, the bank will have “caught up in all of the competitive areas that we perceive we need to address, and we will have areas of innovation that stand us out against competition”, he says. It will also be “the best global transaction bank in this region”.
Smith describes himself as a generalist, having worked in a number of industries including the automotive and fast moving consumer goods sectors, where he specialised in supply chain management with companies such as Diageo and Pilkington before joining RBS in the procurement area.
He joined Lloyds Banking Group four years ago as it was expanding its group operations division. Last October, he joined the fledgling Global Transaction Banking unit, which was being merged with the commercial financing side of the bank, bringing in fixed asset and trade finance. It was primarily a product business with a specialist sales capability, covering retail business banking, SMEs, global corporate and financial institutions.
One of the first steps on the three-year journey has been developing new systems. The bank’s current corporate banking portals, used by 95% of customers, come from its Bank of Scotland and Lloyds heritage.
Closely involved with this aspect is another newcomer. Sean Gilchrist, digital director, commercial banking, (left) who joined at the beginning of this year – 
although he started his career with Lloyds managing branches in the City of London. He has been a high-profile specialist in the digital side of banking, most recently at Barclays, where he ran the UK digital business for personal and business banking.
“Although a banker, I regard myself as a digital specialist nowadays,” says Gilchrist. “We are currently coming towards the end of a big re-platforming project and next year will be launching new services and migrating clients to the new platform.”
Smith says: “GTB has only existed – in its purest form – for a year, and even in its most generic form for two years as part of group P&L.” This has given it the opportunity to think hard about how it engages with customers, and with the rest of the bank. “We have learned new ways of engaging within the corporate world and have found that the attractiveness of the business we drive through our clients lends itself particularly well to investment from the group,” he says.
As well as the new platforms, much of that investment has been in people. Smith reckons that the senior management team has changed by 70% or more, “with major hirings of a dozen or so high-profile hires similar to Sean that we have invested in”.
It has also been listening to clients. “We have been doing more bespoke information gathering exercises with our clients to see where we should be investing in terms of our capabilities,” says Smith. “What happens experientially when you listen to your key clients is that you become more product agnostic and more solutions-based,” says Smith. “Working capital management is one key area: you research your client thoroughly in terms of their expectations and the market expectations over the next five years. Then we enter detailed dialogues with them to find areas where we can assist them to grow and develop their business. Often that cuts across many of the traditional products and you get a more holistic solution coming out of that. We’re doing that in both liquidity and working capital. We have always believed that we have some fantastic colleagues who can make the difference for our clients, but we needed to retool, in all honesty, because you run out of road unless there is investment. The whole world is changing to digital, so we have partnered with our digital colleagues to shorten the whole development cycle and bring the products that our clients are asking for.”
For Smith, the new platform will allow the bank to build closer relationships with its clients and become more involved with their business issues in an advisory capacity. “It’s how one and one equals three, how we can help them in their location strategy with data that we have. How we can help them make sense of the data that they have and through trend information make intelligent decisions for themselves,” he says. “We are equipping our relationship managers with the same tools that our clients have so they can make decisions on the spot and they can know when to bring in specialist teams or leave a client to progress unhindered. It means there is a lot more we can bring to the party, but it is still a people business. This is freeing the time for the face-to-face conversations that you need. We are hiring business people as well as traditional bankers – people that connect with the customers.”
A lot is riding on these new platforms. “The basic tenet is how can you remove the friction from simple transactions and make them very easy to do,” says Gilchrist. “A key driver in the platform design is simplifying the processes and making them very easy to use. Part of that is reaching into the product design, so that the teams are working together from both a digital and a product perspective and thinking digital. Working with our clients, and listening to them and talking to them as we go through that process, gives us a much greater degree of confidence that we’ve got it right. It is the clients that have been involved in the process – not a bunch of so-called experts in a room trying to second-guess what they want.”
The tendency has been for people to think of digital in terms of consumer banking and consumer technology, with companies increasingly expecting their staff to use the same technology as they do at home. “There are two trends we are starting to see: the first is a ‘bleed-down’ of smaller companies wanting more complex solutions because they can see the benefits and as they grow they are using technology themselves and can connect up with the bank to make their operation more efficient, which is a win for them,” says Gilchrist. “The second trend is a ‘bleed-up’ of that easy-to-use experience; people are cottoning on to the fact that just getting something delivered that works technically is not good enough. Part of the thinking that we’ve got is in our new platform we launch next year and its ongoing development is working out how those trends come together.”
Corporates are also expecting to be more closely integrated with banking services. “I don’t see that as anything different,” says Gilchrist. “If you boil it down to its simplest form there are, in essence, two front doors to your bank as a corporate client: one is through the lovely user interface that you log onto, and the other is through a data interface. You are building capability to allow corporate clients to send instructions as data that we can translate and execute, so I just see it as a different front door. People like to dress it up, but I like to bring things back to a simple form. The key to success in the digital space is how you make complex things simple. That’s the trick you need to pull off.”
