By Marc Lien
Director of Innovation & Digital Development, Lloyds Banking Group
and Nick Williams
Consumer Digital Director, Lloyds Banking Group
It is an exciting time to be involved in FinTech, and at Lloyds Banking Group we are determined to play a big role in the FinTech ecosystem, by engaging in debate, contributing to continual innovation, and investing in its future. The face of the banking industry has changed, with customers now choosing to bank in new ways at a time and place that suits them. Finance has had to adapt to keep up with rapidly accelerating customer and technology-driven trends to enable customers and communities to benefit. The power of digital can bring increased prosperity to individuals and organizations that harness its potential. Conversely, it can work against those who are left behind, either due to a lack of basic digital skills, or a poor understanding of online opportunities (the “digitally excluded”), or those who are unable to make use of core banking services (the “financially excluded”).
There is a growing risk that digital exclusion is leading to financial exclusion. We know some low-income families are without a bank account and they risk paying a “poverty premium” because they don’t make their regular payments using direct debit or standing orders, for example. Perhaps more surprising are the findings of a recent Halifax survey that shows customers who are able to manage their money more regularly and more easily online have more than double the amount of savings and are less likely to go into unplanned overdrafts.
By opening up the power of digital to everyone in the UK, we can tackle digital and financial exclusion head-on. At our organization, we are extending an open invitation to the FinTech community to join forces with us so that the FinTech revolution does not just result in private gain, but in the shared legacy of a fully inclusive and digitally and financially savvy society that contributes to everyone’s wellbeing.
Many of our personal, business, and not-for-profit customers are already taking advantage of the power of digital. However, over ten million adults and more than one million small businesses and charities in the UK are not only missing out on the benefits of digital, but are at risk of being left behind and excluded from a society that will in the future have digital at its heart. Our own research, conducted as part of the 2015 Lloyds Bank UK Business Digital Index,1 shows that, on average, organizations that adopt the power of digital have a more confident outlook, gain access to wider markets, and are one-third more likely to have reported an increase in their turnovers in the last two years, than the least digitally mature organizations.
Banks and FinTech communities can and must work together to reduce exclusion. Some progress has been made, as we will see below, but there is much more for us to do.
Our day-to-day relationships with our customers are evolving, not because their financial needs are fundamentally changing, but because they want to interact with us in different ways. Their expectations of how we should serve them are being set by how the best businesses in the world harness digital. For this reason, digital sits at the heart of our strategy and underpins our overall mission to help Britain prosper.
You can now order a taxi, jump into it, and get out the other end without even reaching into your pocket for a wallet. That sets the bar for all organizations, not least our industry. Customers choose to bank digitally because it’s simpler and easier; it allows them to transact when and where they want.
For this reason, we have established a transformation programme to improve our own digital products and services and help ensure we are being digitally inclusive for all our customers.
As a Digital 100 Leader, our guiding principle is simple: it is to be where our customers want us to be. Only four years ago, none of our customers was using a mobile banking app. Today we have six million active mobile users and for many of these customers mobile is their main way to get online. In the past 12 months alone, our 11 million digital customers have logged on to our secure site 1.3 billion times, while transactions totalling £2.2 trillion were made through our commercial online channels in 2014 – that is not far off the UK’s entire GDP.
In 2014, more than 40% of our customers’ new product needs, such as current accounts, personal loans, or credit cards, were fulfilled via digital. To keep up with this shift in customer preference, we deliver enhanced propositions and experiences to our customers every month. To truly be effective in a more digital world, we realize that we cannot stop there. We are reinventing the core services that we provide for our customers by starting afresh with the sole objective of designing brilliant experiences that meet our customers’ needs. Digital is no longer the domain of a few people within our Group – it is everyone’s job. The same is true of innovation. Our journey has taken us from talking about digital, to digitizing the channel, to digitizing the bank, to digital being in our very DNA.
One key part of our digital progress in this era of rapid and pervasive change has been creating a digital platform that allows us to quickly innovate both internally and with the FinTech community. We have invested £750m over the past three years in a single digital architecture that provides consistency and resilience across all desktop, mobile, branch, and telephony touchpoints.
This investment is important, but to create a culture of experimentation and to drive innovation across the Group we have also set up LBG Innovation Labs to constantly test new ideas and concepts. More than 50 innovation ideas have been built and tested with customers this year alone and many of these are, or soon will be, with our 11 million digital users. We have created a safe controlled environment where it is “okay to fail” and we can test quickly. As a result, we have sped up the customer feedback cycle and we are helping the business de-risk future investments.
We are the first major bank to have a Digital Division reporting directly into the Group CEO, centred around a specialist digital hub housing 1,200 colleagues in London. This division has a mandate not just to focus on digital performance and delivery for the Group, but to be a catalyst for change for the entire organization, facilitating our ambition to be the best bank for customers in the digital age.
We believe opening up the power of digital to everyone is a key element of achieving our mission of “helping Britain prosper”. In the next three years we are investing a further £1bn in digital, on top of our investment in IT resiliency, to transform ten customer journeys across physical and digital touchpoints. We are starting with a clean sheet and a simple question: what will “brilliant” look like for our customers?
We can and will make digital more accessible for all our customers and one way we are directly doing this is by committing 20,000 Digital Champions, recruited from Lloyds Banking Group colleagues, by 2017. These Digital Champions pledge to actively help customers, friends, and family to get more out of being online by helping them to understand the benefits of the internet and inspiring them to increase their basic digital skills.
Our Digital Champions initiative was launched as part of our commitment to the digital skills charity Go ON UK, whose vision is to empower all people, small businesses, and charities across the UK to reach their digital potential. Go ON UK works in partnership to achieve digital inclusion and Lloyds Banking Group is proud to be a founding partner and board member. One of the many exciting projects on which we are collaborating is the creation of the new Lloyds Bank Digital Index, which will provide a measure of basic digital skills and map the links between digital and financial exclusion.
While we are determined to seize opportunities such as these to make digital accessible to all, it is the collective power of banks, with their regular and frequent interactions with millions of people and organizations across the UK, and the entrepreneurial drive and technological expertise of the FinTech community, that will ultimately help maximize the potential of digital. For this to be truly achieved, we must collaborate – and do so in a way that is inclusive to everyone.
FinTech points the way to our digital future and we need to nurture and harness the creative and visionary power of FinTech through strategic partnerships, collaborations, sponsorship, and championing of the ecosystem. Lloyds Banking Group is mobilizing around FinTech and we are already reaching out through partnerships such as the one with Startupbootcamp FinTech Accelerator, where we were involved in launching the first Global FinTech Insurance Accelerator programme.
We are also delighted to be a founding member of Innovate Finance, a new trade body for technological innovators working to support the FinTech ecosystem in the UK. We supported Innovate Finance’s London Tech Week, which brought together key players and influencers. London is the best place for FinTech start-ups and the city is the top location for FinTech job creation,2 at a time when financial services is alight with innovation. With FinTech generating over £20bn for the UK economy and a half of all investments in Europe being taken by the UK, it is a great time to be part of such an important movement.
We joined forces with Innovate UK, the Government’s Technology Strategy Board, and four other partners to launch the first FinTech Open Innovation challenge to the start-up community. The challenge was: “How can digital innovation be used to improve financial literacy and help people better manage their finances for themselves and their families?” What we were looking for was a start-up that would improve financial literacy and skills among consumers in an engaging and intuitive way, making a real difference to people’s lives.
Small businesses and start-ups are well placed to explore financial innovations and tackle the types of issues we pose through the Innovate UK challenges. Lloyds Banking Group can provide these FinTech companies with access to 11 million online customers who can benefit from this kind of innovation. The synergies and mutual benefits from such sustainable partnerships are plain to see – we are not only using our digital platform to innovate for our customers, we are collectively raising the level of our ambition to make a more profound and lasting impact.
Technology is driving changes in how we work, how we bank, and how we live our lives. Many individuals and organizations are already harnessing the power of digital. Others are either unable to, due to lack of knowledge or expertise, or they are simply unaware of the opportunities passing them by. We cannot tolerate digital exclusion and allow anyone to fall behind. For the sake of our citizens and businesses, our economy, and the future prosperity of our country, we must develop high digital capability throughout our society.
Lloyds Banking Group can and will play an important role in helping provide the necessary access to digital, but to harness its full power and make a lasting impact, organizations such as ours and the FinTech community must combine their strengths and work in close partnerships. Only by working hand in glove can we tackle digital exclusion and create a lasting societal legacy for everyone in the UK. We want to be part of the movement and we invite you to join us because we know the best ideas come from collaboration.
Let’s work together.