Lloyds Banking Group are the UK's leading provider of current accounts, savings, personal loans, credit cards and mortgages, with just under 30 million customers. Their success is partly down to their multi-channel approach, allowing customers to interact how they want, and their innovative methods of facing the future of the financial industry head on. In a world that is becoming increasingly digitized, Lloyds are a bank leading the charge into the future with their innovative digital solutions.
To get insight into exactly how Lloyds are embracing the digital age, we spoke with Jehangir Byramji, Senior Fintech Lead, Innovation Labs at Lloyds Banking Group.
How has the financial industry changed as the world becomes more digitised?
No industry stands still, yet in recent years there has been an unusual acceleration of change in financial services, including banking and insurance. Another major source has been the explosion of new tech-enabled businesses - FinTechs. These FinTech companies have been jumping on changes in the industry trying to find new ways to meet customer needs. A key enabler has been Open Banking, which is creating a common set of standards and capabilities and will be a significant opportunity, not only for customers but the industry to work together to shape the future.
The way our customers interact with us is changing with fewer customers going into branches or calling our contact centres, as they are servicing their needs online. We are continuing to invest in areas to enhance our digital offering so we can provide customers with the products and services they want and need.
This doesn’t stop at online or mobile; we’re also bringing digital to our branch and telephony centres to allow us to service customers in their channel of choice with the most relevant help to meet their needs. It also means supporting our colleagues and ensuring they have the digital capability to fulfil their jobs.
9% of the UK population are offline, with 51% saying they aren’t interested in digital. Although 1.1 million more people have gained basic digital skills over the last year, there are still 11.5 million that do not have basic digital skills. We have identified that many small businesses and charities need to do more to improve their digital skills, as 38% of small businesses and 49% of charities lack basic digital skills. This has huge ramifications for the UK economy as most digital small businesses are twice as likely to report an increase in turnover than the least digital. Likewise, charities that are more digitally mature are 28% more likely to report an increase in funding than those who aren’t.
We’re extremely proud to partner with AbilityNet, to accredit our websites and apps and provide the best digital experience for all our customers. We want to make it easy for customers to manage their money. Lloyds Bank, Halifax and Bank of Scotland services are always driven by customer expectations and demand, and as new technologies are released and adopted, we will continue to test how we can integrate them into our banking services.
Branches can also play an important role in helping less confident customers get online and for some, the branch provides a failsafe when things go wrong and they need a hand sorting it out. We believe that the role of the branch remains important given increasing concerns about cybersecurity and fraud, and in a post-Open Banking world, branches can be the place where our colleagues can help customers make sense of the choices available to them. It is worth noting that at the end of last year, 90% of our customers were still within five miles of a Lloyds Banking Group branch.
What are the challenges of innovating in the financial industry?
Banks are always innovating, over the decades bringing new solutions and adding customer convenience. Rising customer expectations and the emergence of new competitors such as ‘FinTechs’ – software-based banking providers, mean we are finding new challenges that need tackling. Some firms, like Lloyds Banking Group are embracing new ideas and new ways of working; we are using digital technologies to expand our delivery options in areas such as mobile banking. Regulation is an often cited reason why financial services are not seeing more of this kind of innovation. However the regulation applies equally to incumbents and FinTechs alike and in the UK we have regulators, like the Financial Conduct Authority, who encourage innovation to better solve customer problems. Lloyds was in the first cohort of their regulatory sandbox, as we sought to bring digital solutions to our branch experience.
How do you encourage a culture of innovation at Lloyds Banking Group?
Working in Transformation at Lloyds Banking Group is not like working at a traditional bank. It is a business that is encouraging a digital first culture, to develop innovative ideas and embed digital thinking into everything we do. This focus on culture, has noticeable changes, including transforming how we run, build and govern programmes. With this recognition on the importance of digital and the part it will play in the future of the bank, we developed a bespoke digital graduate scheme – the first digital-specific graduate training scheme for a UK bank – for those looking to develop a professional career in digital. We have colleagues focusing on driving an innovation culture across the Group. They help colleagues unleash their creativity, develop new propositions, and supports new ways of working, through Innovation Hackathons, Mash ups, and TED-style talks to bring the outside-perspective in.
What do you think will be the next big disruptor to FinTech?
FinTech is the label given to the current group of young businesses all trying to makes their way in the financial services industry. Their enthusiasm is palpable and some are founded by ex-bankers, who bring their understanding of the intricacies and peculiarities of the industry as well as the high bar required by our customers and regulators. In recent weeks there has been much made in the press about the looming presence of BigTech or GAFA (Google, Apple, Facebook and Amazon) and whilst it is true that they have brought some propositions to market we do not yet see them gaining banking licences. It is likely that the next disruption in banking will again come from a brilliant way to solve customer problems delivered by companies that clients trust, like ATMs did the 20th century.
How do you expect your industry will change over the next five years?
I don’t have a crystal ball to help predict the future, so I suggest we take a steer from the expert conjecturers. Venture Capital has historically invested in a number of areas within Financial Services, first there was a wave of money in Payments and Lending, with companies like Stripe, TransferWise and Funding Circle or those offering bespoke solutions within the specific valuechain, like Kabbage. You then had investment in Wealth Management in the form of Robo-advisors like Betterment and in technology like blockchain. We have recently seen investment in Insurance and Regtech, where businesses are trying to make regulation easier and simpler for the regulated firms (the banks and insurers). I expect there to be increasing focus on the uses in banking from artificial intelligence, including in smart assistants and do not underestimate the benefits of the ‘Internet Of Things’ and connected health, especially in insurance.
Hear more from Jehangir at our Open Innovation Summit in London, April 25 & 26.