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Sydbank, one of Denmark’s biggest banks, is part of a group of banks that share core IT platforms through a jointly-owned IT business, Bankdata.
Bankdata functions as a partnership platform, where Sydbank, Jyske Bank and nine smaller organisations build common bookkeeping and other core IT systems for banking.
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“Banks have to do a lot of financial reporting, and there are many processes and technologies around security that are common from bank to bank,” says Mogens Kristensen, who is responsible for enterprise IT operations at Sydbank. “These things are taken care of through Bankdata.”
Bankdata, which has 650 employees, was founded in 1966, and Sydbank has been a member since it was established in 1970, says Kristensen. “We have some smaller IT systems outsourced to other partners, but Bankdata is what matters to us. We pay for about 30% of its total budget.”
Kristensen does not regard the arrangement between Sydbank and Bankdata as outsourcing. “It might be outsourcing in legal terms, but we own a part of Bankdata, and we see it as an extended part of our own IT,” he says.
Sydbank has 55 in-house IT employees, plus the resources within Bankdata.
Bankdata makes no profit, and all member banks are both owners and customers. It is one of three bank IT partnerships in Denmark.
“It has been very common for banks in Denmark to partner up in the back end like this, because it is easier to compete with larger banks if you unite and create economies of scale,” says Kristensen. “It would be inefficient for each bank to carry its own costs by itself for things that all banks have to build, and that could be built the same way in all banks.”
The early digitisation of the Danish banking sector is another reason for these collaborations, says Kristensen. “But there are IT partnerships similar to these ones in other industries in Denmark, too. For example, the farming industry has partnerships in bookkeeping and the transportation sector purchases spare parts in partnerships, based on the same digital infrastructure.”
Kristensen does not see traditional outsourcing as an alternative to Bankdata. “There has to be an understanding of banking for a setup like this to work,” he says. “Much of what Bankdata does is exactly like traditional outsourcing, but when it comes to taking on board new bank customers, handling laws and regulations, and so on, it is not.”
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The only drawback Kristensen sees with Bankdata is that it can sometimes be difficult to find identical processes between the banks. “But this is not a big drawback,” he says. “If a process is totally inappropriate for us – for example, a mortgage process – we just stick to our own process.
“Apart from this, I only see benefits with Bankdata. I do not think we could have handled IT as efficiently ourselves. But, on top of this, we still have to differentiate ourselves from the other banks.”
And it is this differentiation that Sydbank’s own IT function is working on, says Kristensen. “We are filling the gap between the core IT systems that Bankdata takes care of, and what we need to fulfil the particular business model of Sydbank in a digital world.”
For example, over the past 18 months, Sybank has been working on a platform to get more from data. “The platform will act like a bridge between the systems of records and the customers,” says Kristensen. “The plan is to enable Sydbank to configure standalone tools, algorithms and rating systems to differentiate the way we handle our customers to give them the best service.
“The platform will be an intermediary between Bankdata and channels such as smartphones, tablets and computers.”
Taking new customers on board is an example of an important area where Sydbank wants to operate on its own, says Kristensen. “Which new customers should we pitch for? That is a question we cannot find answers to in a partnership, because we do not want to share that with anybody.
“We use the partnership to build a way to communicate with customers, but how we communicate is part of our business model, and we do not to partner around that.”
Some of the algorithms for customer interactions are set up in the common platform, and some are in Sydbank’s own customer relationship management (CRM) system, says Kristensen.
The biggest challenge ahead is to enable Sydbank to adapt to new demands from customers in a highly agile and flexible way, says Kristensen. “We have to prove that we can follow our competitors in this area – and, in some ways, also be ahead of them.
“And that is quite a task, because we in Denmark are far ahead in digitisation, thanks largely to initiatives made by the public sector.”
The most important lesson Kristensen has learned since taking responsibility for Sydbank’s IT in April 2014 is to begin from the outside and go inwards, instead of the other way around.
“You have to look at it from the customer’s point of view,” he says. “What is the service you want to give them? Then you can reverse-engineer your way back to how you have to set up IT to make it happen.
“You can’t start from an IT point of view and work your way outwards. If you do, the service will have nothing to do with customer demand.”