The Co-operative Bank has set aside £500m for a four-stage IT transformation, following the announcement of a £1.5bn rescue plan.
The troubled bank, which was previously 100% owned by the Cooperative mutual before it sold off 70% of shares to investors, will also make job cuts and close about 50 branches.
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The bank has identified major IT transformation as a priority and proposed four main areas for investment.
“As result of historical underinvestment (among other factors), a number of the Bank's IT systems now, or will soon, require their hardware and operating systems to be updated and improved,” said the bank.
The four phases: remediation, digital catch-up, simplification and strategic optimisation will begin next year. “The primary focus for 2014 and 2015 will be remediation of the existing system issues to ensure the Bank can meet its on-going commitments to regulators and customers and the creation of an IT platform that allows the Bank to provide new digital channel applications to enable appropriate online products, specifically web-based and mobile banking and functionality for its customers,” said the bank.
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The Co-operative bank has budgeted £500m in connection with the re-engineering of its IT platform to support the Core Business strategy of the Bank, its cost-saving programme and the reorientation of the Bank's distribution channels.
The bank will focus on retail and SME businesses in the UK.
In September the bank ditched its plan to migrate its core banking system to an off-the-shelf system from Infosys.
Co-operative Financial Services signed an agreement with Infosys in 2009 to implement the platform, known as Finacle, but this was put on hold last year during the planned integration of Lloyds customers and branches. The deal with Lloyds has subsequently fallen through, but the migration to Finacle never got going again.
Daniel Mayo, financial services analyst at Ovum, said the Co-operative bank has old systems and had multiple systems for different lines of business. “The bank was finding it difficult and expensive to make changes to existing systems.”
He added that the bank had already identified this challenge. “It was already planning on moving [to Finacle] so would have had a business case."