As the world’s largest building society, Nationwide is expected to take the lead on product and service innovation.
The man tasked with leading the technology side of that is the mutual’s chief information officer Gary Delooze, who virtually sat down with FStech editor Peter Walker to talk through how an institution with 200 years of history tries to keep up with disruptive challenger banks.
· Can you run me through a rough timeline of the changes made so far as part of the five-year technology strategy investment?
We set out the strategy in 2018, with operational resilience being our primary focus, addressing some of our legacy challenges while building new capabilities.
A lot of our technology was built at a time when we had just a few million members rather than 16 million, so we’ve had to really scale up to support much higher volumes. Our member habits have also changed with the increased adoption of digital technologies and the expectations that these bring, plus more widespread expectations of real-time payments. We’re also facing increased scrutiny from our regulators.
We make around 50,000 changes a year to our IT estate, so the first few steps in our strategy were about simplifying this estate to make the next steps easier and to reduce our costs.
Operational resilience is also top of our priority list, and we went live with new mainframes recently, which are fully replicated across our two main data centres, mirroring the infrastructure across the sites to ensure that we can continue to provide services to our members even in the event of a disaster, such as the loss of a whole data centre. The regulators have been pushing for faster and faster recovery times from such events, which used to be measured in days, but now has an eight-hour target. We’ve set ourselves a four-hour objective, which will eventually go to two.
In terms of the move to cloud, we were initially very reluctant to take this step, and experimented around the edges, but early last year we set up a Cloud Centre of Excellence to accelerate this journey. Using partners, we were able to move much faster, bringing in expertise to help build our capabilities and create new platforms. Now we’re truly multi-cloud, with services running on both AWS [Amazon Web Services] and [Microsoft] Azure, with the ability to move some workloads between the two. We have a number of sales journeys and services running on AWS - including the new confirmation of payee service, for instance - and we are about to launch a new website on Azure.
This move has allowed us to move faster from ideation through design, test, production and into live. For example, we’ve delivered new cloud-based services to our members in less than four months, whereas previously we would have taken that amount of time to just write up the requirements documentation.
We’ve also simplified our legacy platforms, taking out about 30 per cent of the legacy codebase on our collection of mainframes and midrange servers. The key to this is in the thinking that any complexity is a tax, meaning it’s harder to change things that are more complex - everything just costs more time, money, people - and it costs more to run, too.
The next wave is about building digital platforms and experiences, for both our members and our colleagues, and delivering services that seamlessly span our branches, contact centres, apps and other digital services. Building a single platform, based around one set of micro-services that can support all our channels, will dramatically increase our agility while reducing our costs significantly.
And finally in terms of people, locations and working culture changes, we’ve built some fantastic new workspaces, which of course currently aren’t being used, but once we’re back to the office our London and Swindon digital technology hubs will be great places for our people to collaborate. We are fostering a learning culture, with people being prepared to experiment and fail, trying new approaches, changing methods and tools in order to create better solutions, sooner, safer and happier than before.
· Who decides and how is it decided where to put that money - presumably any number of areas of the building society would like some digital transformation?
A few years ago there was very little joined-up, architectural thinking on this; every year we developed a bottom-up wish list and tried to prioritise this based on what we could afford. But when we started the technology strategy work in 2018 we tried to put a bit more structure around this, while also becoming more business-led. We spent six months interviewing people from across the business, asking them for their priorities, and how they though we should prioritise the investment. Our strategy was then based on the roadmaps we developed from these discussions.
Then, having agreed the strategy and our 'big investment' in technology, it all got exciting very quickly and everyone wanted in. The challenge was then to stick to our plan and execute, and not be distracted by new ideas and discussions.
About a year ago, we decided that we needed to create more focus on our members and the value we provide to them, so we started to pivot our structure and operating model away from communities, which are an internal construct, towards what we call 'member missions' – having people organised around how we get things done for our members.
· There's been a combination of in-house work and partnerships or investments in/with third parties - again, what's the thinking behind finding that balance?
Going back six or seven years, we outsourced a lot of our IT work. We decided to carve up our world into 12 different development centres, all outsourced to a set of four (now five) technology providers, which provided at least 90 per cent of the people. They’ve done a good job for us in delivering a lot of change, but over time they have become quite expensive in comparison to more modern approaches, and we didn’t always invest in managing those relationships as well as we should have done – for example, we let our partners take control of things that we should have been managing, such as our architecture.
As a result, IT change was costing us a lot of money, so we started to re-evaluate how we deliver work, rebalance our workforce and change how we work with our partners. But we aren’t going to take all the work off them, as they give us the capability to flex up and down to meet demand, plus they bring additional expertise and insight that we don’t have in our own team - but it’s knowing how and when to use that which is important.
We’re now working with them to develop the right model for the future, focusing our spend in areas where we think it’s important to do so, and looking at how we can align new delivery methods - such as distributed agile - with new partnership models. We will spend more with some partners, and less with others, but we’re also hiring hundreds of our own engineers, aiming for at least a 50/50 split over the next few years.
· What differences does being a building society have in terms of making these changes have, as opposed to similarly-sized British banks?
I’m always being reminded that we’re not a bank, and we are subject to slightly different laws and regulations. But with 10 per cent of the UK current account market, we are now an important part of the retail banking ecosystem.
As a building society we’re one of the few that offers current accounts and 24-hour banking. So, our challenge is to provide the same services in the same way as any bank, but be more focused on our members, who as a mutual, are also our owners. So when it comes to technology, we’re obsessive about service. For instance we have a low risk appetite for outages, and we regularly come in well under that, but I’m still closely scrutinised by my board on every outage we have.
Our member focus is our strength – and is reflected in how our members feel about us. It is also why we will try to do everything we can to meet their needs, such as keeping branches open when the high street banks are closing theirs.
· I’d better address the virus in the room - what's the impact of the pandemic been on the digital transformation schedule?
Well, without knowing it we had been preparing for this for some time, upgrading our network infrastructure, rolling out new devices with Windows 10, migrating to Office 365 and Teams, moving many of our end user services to the cloud and increasing our ability to work remotely.
We started to monitor the COVID-19 situation at the start of the year, but in early March we decided to run an experiment by asking everyone who could work from home to do so for a few days. We asked over 8,000 people to work from home for a few days, and it was actually ridiculously easy. Two weeks later we went into lockdown, and we had to do it for real for over 12,000 people.
As we started to see absences from the virus we had to protect our services, so we re-routed calls to our branches to make better use of our frontline staff - some of whom we moved into the back office to protect them - we enabled our contact centre staff to work from home if they felt unable to work in the office or had to isolate, and to allow us to better distance in the centres.
We have continued with a lot of our IT change portfolio, delivering around 94 per cent of the changes that were planned in that quarter, delaying only those changes that could impact members during this sensitive time. Our partners also leaned in, securing end-user devices to enable people to work remotely, and quickly scaling up our use of distributed agile methods and tools.
Then, when the regulators asked us to provide payment holidays for our members, we needed to mobilise quickly to enable self-service and take the load off our branches and contact centres. So we repurposed some of our existing cloud customer journeys and designed, built and implemented our online payment holiday requests in about two weeks – going live before many of the banks.
We also used robotic process automation to take down some of the application queue lengths, as they had grown large very quickly in this period.
· And finally - what can you tell me about what's next on the tech agenda?
In the pipeline for next year, payments will probably be our biggest focus. We have just signed a deal with Form3 to use their new cloud-based payments platform and we’ve invested in them too, as we’re going to move a lot of our legacy payment technologies from some old, on-premise systems to this new platform. We’ll do it very carefully of course, but early signs from the pilots are positive.
We will continue to invest in operational resilience, removing any single points of failure, further increasing our capacity and improving our recovery capabilities.
More and more of our infrastructure will be shifting to the cloud, and we will be migrating some of our existing applications to our new public cloud platforms. For example, our accounting, reconciliation and finance systems are moving to software-as-a-service based solutions. And in terms of our digital platforms, we will start to build our single digital engagement platform, again building on cloud platforms and services.
With all of this technology moving to the cloud we will eventually end up with a couple of fairly empty data centres, so we’ll then be looking to move what’s left into co-location facilities and closing down our own data centres, but this will take a few years to achieve.
FStech meets: Nationwide CIO Gary Delooze
As the world’s largest building society, Nationwide is expected to take the lead on product and service innovation.