skip to main content
Close Icon We use cookies to improve your website experience.  To learn about our use of cookies and how you can manage your cookie settings, please see our Cookie Policy.  By continuing to use the website, you consent to our use of cookies.
Global Search Configuration

Straight Talk Technology

Ovum view

Lloyds Banking Group, one of the UK’s largest banks, announced its 1H18 results at the start of this month. While overall operating expenses for the bank were flat, Lloyds explicitly focused on its investment in technology, which it expects to be 20% up over 2018 compared to 2017. With technology spend at around 15% of its overall cost base (circa £1.2bn), this spend growth alone represents 3% of total operating expenses – certainly not an insignificant figure given the bank’s reputation for its strong cost/income ratio and its focus on cost management.

What is driving this scale of investment? The answer is “digital transformation.” The bank claims to have one of the largest transformation programs in the sector, involving over 20% of its employees and over £3bn in strategic investment over 2018–20. Its focus is on digitalizing the group, not just on the front end but end-to-end transformation involving more than 70% of the cost base. Around a third of the technology spend is focused on simplification, with progressive modernization of its IT and data architecture, while two-thirds is directed towards enhancement and new capabilities.

On the front end, the objective is to drive a leading customer experience. Interestingly this is not just within the digital channels, but also in the branch network. While it is “reshaping” the branch network, it is also adapting, with a move towards mobile branches that can cover multiple locations, and a shift in purpose to addressing “complex” needs, such as mortgage appointments. The target is to have 60% of branch customer-facing time spent on those needs by 2020 compared to 34% in 2014. That said, the digital channels are clearly strategic priorities, with investment focusing on increasing the pace of development and innovation. The bank has re-platformed its mobile app, allowing a doubling of the release cycle, as well as investing in developing new propositions enabled by open banking in the UK (such as account aggregation).

With regard to end-to-end transformation, a core technology focus has been on robotics, with major investment in robotic process automation across areas such as mortgages, financial planning, retirement, payments, and risk. This will help the bank finance the level of technology spend while seeking to actually reduce overall operating expenses by 2020. Within this, there is also strong investment in cloud infrastructure, developing both private and public capability to drive cost efficiency and scalability.

While one institution doesn’t make a trend by itself, Lloyds’ strategy, although relatively aggressive in magnitude, is not out of line with more general undertakings in the sector. Ovum’s 2017/18 ICT Enterprise Insights program found that 25% of banks were planning significant ICT budget growth for 2018 (compared to under 10% in 2017), and Ovum expects that this will likely expand further in 2019 (the 2018/19 program will confirm in October). With the regulatory environment calming down somewhat (particularly in regard to penalties and consumer compensation costs), digital transformation will be the key focus for nearly all banks over 2018–20 and will be a strong driver of ICT investment growth.

Straight Talk is a weekly briefing from the desk of the Chief Research Officer. To receive this newsletter by email, please contact us.

Recommended Articles

  • Service Provider Markets, Consumer & Entertainment Services,...

    MWC 2018 Highlights

    By Ronan De Renesse 27 Feb 2018

    Over 20 of our senior Ovum analysts and consultants attended this year’s Mobile World Congress in Barcelona at the end of February. In between meetings, briefings and presentations, our analyst team were blogging and tweeting about key developments, trends and rumors. Have a look through our daily MWC 2018 Highlights to find out what happened.

    Topics 5G AI IoT Cloud Payments SDN/NFV Smart home

  • Internet of Things

    IoT Viewpoints 2018

    IoT Viewpoints explore the IoT opportunity in 2018 and beyond. Download our latest e-book to get our newest collection of thought leadership articles on the emerging IoT trends, technologies and opportunities.

    Topics IoT

  • Consumer & Entertainment Services

    US pay TV: Is it facing an existential threat?

    By Adam Thomas 28 Mar 2018

    With US pay TV having endured the worst year in its history, thoughts have inevitably turned to the future. The likelihood remains that the immediate future will remain highly uncomfortable for everyone except the scaled multinational digital platforms.

;

Have any questions? Speak to a Specialist

Europe, Middle East & Africa team - +44 (0) 207 017 7700


Asia-Pacific team - +61 (0)3 960 16700

US team - +1 646 957 8878

Email us at ClientServices@ovum.com

You can also contact your named/allocated Client Services Executive using their direct dial.
PR enquiries - Call us at +44 788 597 5160 or email us at pr@ovum.com

Contact marketing - 
marketingdepartment@ovum.com

Already an Ovum client? Login to the Knowledge Center now