Faster progress to faster solutions: meeting client needs and behaving like a fintech?


Gavin McLean, Director & Head of Payments Product Management, Global Transaction Banking, Steve Everett, Managing Director and Head of Payments, Global Transaction Banking and Otto Benz, Payments Technical Services Director, Global Payments, explore the complex drivers behind the evolution of cash management and payments, and talk us through the progress made by Lloyds Bank towards developing a new platform that will deliver for clients now and in the future.

“Our clients’ needs are changing because their clients’ needs are changing – they expect to manage their money immediately.”

Gavin McLean

A combination of regulatory change, technological advances and customer demand is driving a transformation in cash management and payments.

In an increasingly real-time, always-on world, the expectation of being able to act instantly and trough a range of channel options is flowing into financial services. Consumers and organisations expect to be able to see and transact with their financial products in near real time, wherever, whenever and however they choose. To meet this need, financial institutions and large corporations require new, innovative solutions.

“Our clients’ needs are changing because their clients’ needs are changing – they expect to manage their money immediately,” says Gavin McLean. “We, as a bank, need to things differently and better to ensure we meet the needs of our clients.”

As was announced in Toronto last year Lloyds Bank has invested, as part of its Group Strategic Review Programme in a new Cash Management & Payments platform and work is progressing at pace to build and deliver this new capability.

This significant level of investment is driven by a range of factors explored below but key to this programme is behaving less like a bank and more like a fintech.

Client expectations are driving change

Depending on their client base, financial institutions and corporates require a range of new solutions as clients change and develop their demands and expectations including:

  • Access to instant payments, both domestically and internationally
  • Access to accounts on the move and to authorise payments globally
  • Fully automated and integrated 24x7 instant payments
  • End-to-end Straight Through Processing (STP) to reduce manual intervention and cost
  • Consistent and flexible experience across multiple channels
  • Access to actionable data and insights

The challenge for many banks is that it’s not possible to deliver on these requirements using their existing technology, bearing in mind that solutions should be future-proofed, and implemented with minimal impact to clients.

With new competitors entering the market with new and up-to-date technology, clients expect innovation to be delivered faster and more frequently by their financial services partners.

“We created payment and cash management systems following Faster Payments - which started as a regulatory project to enable people to move money instantaneously,”

Steve Everett

Regulation and technology enabling innovation

As well as changing client needs, technology itself is a factor in driving change.

“The proliferation in the use of cloud computing technology means that it’s possible to provide a lot more service and a lot more horsepower to support those services than it has been historically,” says Gavin McLean.

Regulation too, is playing a huge role in this evolution, with Open Banking and PSD2 presenting opportunities for banks to create new and improved propositions for their clients.

“We created payment and cash management systems following Faster Payments - which started as a regulatory project to enable people to move money instantaneously,” says Steve Everett.

“We are embracing Open Banking changes to create new propositions and bring new relevance and value to existing and perhaps established capabilities. For example we want to use the changes in the cheque clearing cycle in the UK to work with our clients on how we can give them access to their funds more quickly and reduce pressure on working capital.

“So, there’s a huge opportunity not only from regulation in the UK, but regulation in other markets that our customers operate in around the world.”

The new Cash Management & Payments platform being built is based on ISO20022 standards means Lloyds Bank is well placed for future regulatory changes, as well as being able to develop solutions that go beyond regulatory requirements.

“We have made a considerable commitment to the new investment but it doesn’t mean neglecting work on existing platforms,”

Otto Benz

Tech partnerships

Traditionally, if organisations decided their existing platforms couldn’t support future needs they would be faced with whether to build in-house or partner with third party technology specialists. However, another choice is now presenting itself - the option to work with a technology partner or with a fintech to build or leverage tech capability. This is the choice Lloyds Bank has made in partnering with SAP and Finastra.

The agile methodology used in the partnership entails a process of constant iteration and test-and-learn, rather than building over a set period of time and launching in a single release.

“We’ve got a series of major releases, with a minimum viable product version launching towards the end of this year,” Otto Benz explains.

“During the course of next year, we’ll have a number of implementations where we enhance the product set for new customers. We’ll then begin the process of migrating payment flows over to the new platform.

“It’s vital to keep customers’ payment flows fully operational during the development and during the migration process, so over the course of the next year we’re going to put a lot of thought into making sure that process is as seamless as possible.”

Of course, customers need to continue to be served as the new platform is developed.

“We have made a considerable commitment to the new investment but it doesn’t mean neglecting work on existing platforms,” says Otto Benz. “We’ve got a significant amount of investment in the systems that support our commercial payments processing planned to co-exist with the new implementation so when it’s ready it will slot into that infrastructure framework.”

New agile ways of working

Central to our way of working is how we have structured our delivery team. It is designed to empower, mixing colleagues from Lloyds Bank with those from SAP, Finastra and other third party experts in ‘labs’ using co-location.

This helps agile working by allowing teams to identify and resolve problems quickly and effectively, often without the need for structured meetings or workshops. Co-locating business colleagues with architectural and design teams also ensures that client propositions remain at the heart of the project, and that design is consistent across the end-to-end journey, rather than the sum of component parts. It also helps ensure the platform stays up-to-date with the pace of change we are experiencing in the UK.

“Engineers, programmers, testers and business analysts are working alongside members of the product management and development team, so as we identify changing client needs, changing market practices and upcoming regulation there is not a large administrative process to get those requirements captured,” says Gavin McLean.

“Practitioners and experts who are working very closely with our customers are absolutely embedded in the delivery of the platform. That’s what we believe is the combination that will give us the platform we need now and make sure it’s fit to serve our customers in the future.”

The future of cash management and payments

With the spread of Faster Payments and the developments in SWIFT gpi, the ability to make instant payments is spreading globally, giving us the capability to transform how money is moved around. Combined with API-enabled technology, this is transforming the speed at which payments can be made and opening up the real-time nature of cash management.

To future-proof themselves, banks need to combine the modern technology on which they run their business with the ability to use agile transformation to rapidly flex their propositions to meet changing client needs.

“Our investment portfolio is centred on how we’re going to deliver the developments that respond to changes in regulation, technology enablement and client needs,” says Gavin McLean. “Improving the way our clients access our products and services is right at the heart of that strategic investment at Group level.”

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