Nationwide’s £1bn IT transformation is beginning to show its benefit as the building society launches its latest current account, in its bid to take a bigger share of the UK retail banking customer base.
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The building society’s latest FlexPlus current account was made possible by the Society’s new banking platform, according to Nationwide.
The firm has set itself up to win customers from other banks when a new rule comes in, later this year, to make it easier for UK consumers to change banks.
Tony Prestedge, Chief Operating Officer at Nationwide, explains: “Meeting the needs of our customers is at the heart of everything we do and our investment in technology gives us the tools we need to do that.”
“The new banking platform went live last year and is at the heart of our FlexPlus current account. This is just the start of a series of planned developments to make us a more agile, innovative and responsive financial services provider,” added Prestedge.
Years of under-investment meant the building society's systems had not been kept up to date, so it committed to spend £1bn on replacing core back-end systems that had been built in-house decades ago with off-the-shelf banking software from SAP. At the same time it chose to move its customer-facing delivery channels onto Microsoft software. It also led to Nationwide outsourcing IT for the first time.
The transformation project was part of a plan to make it easier for the company to introduce new systems for products and services. Nationwide launched its mobile banking app, in November, which has been downloaded by over 400,000 people. It has also launched a new online banking platform.
During the turmoil in the financial services sector, which began in 2008, Nationwide was unique in that it invested heavily in an IT transformation project.
While most finance firms held back discretionary spending during the downturn, and still largely are, Nationwide invested heavily, and still is. In 2008, Nationwide set out on a journey to replace ageing IT systems.
Alex Kwiatkowski, research manager EMEA banking at IDC, says that Nationwide are in one of the strongest positions in the UK and could be one of the big beneficiaries when rules about making it easier for consumers to change bank accounts come into force.
“It has a very good new technology platform and it is not tarnished by the same dirty brush as the other banks because it is owned by members. They also have a good balance between growth targets and the need to focus on customer service levels.”
Government regulation has stated that UK bank customers should be able to switch bank accounts in seven days by September this year, so banks will have an opportunity to grow customer bases. “The seven day account rule is very likely to benefit Nationwide,” said Kwiatkowski.
He added that Nationwide will also benefit from its conservative building society culture with no need to ringfence risky operations like the big retail banks have had to do to separate retail and investment banking operations.
Daniel Mayo, analyst at Ovum, agrees: "I think Nationwide is in a stronger position than some new banks, largely as it has the combination of new systems with the credibility of being an existing, well established brand and also relatively untarnished by the banking crisis. It also has the physical reach (in terms of branch network) and existing market share to have a more significant impact."
"The new systems should allow it to win customers, particularly if it starts to launch more innovative products in the market."
But Ralph Silva, analyst at SRN, says despite Nationwide's good name he does nit see it winning a high volume of retail banking customers from other banks. "Nationwide is the building society on steroids but I do not think the changes to account switching rules will benefit them."
"People are not going to change their bank accounts. In the US it takes two days to change and people just don't do it." He said this is because although it is easy to switch accounts a lot still needs to be done to transfer payments.
He added that the "forgiveness factor" is highest in banking than in any other sector. "Consumers will take mistakes from a bank more than any other service before switching."