The group is migrating its core IT systems onto a single platform and has begun work to develop a new banking system based on Java technology.
The £170m IT consolidation project is expected to save its cost each year. Half the savings will come from reduced IT expenses and half from more efficient back-office operations, according to research firm Celenet.
The project aims to streamline the bank's IT infrastructure following acquisitions. The Santander group owns two major banks, Santander Central Hispano and Banesto.
"As a result of its aggressive acquisition strategy, Santander, like so many other large banks, has been left with a tangle of disparate IT systems, which have significantly inflated costs," said a report from Celenet on Santander's IT.
"The scales of economy that should accrue to merging banks as a result of greater scale remain elusive, most often because the technology and operations of the acquired banks are not integrated and continue to run separately."
In 2002 Santander began the Partenon project to consolidate its banking systems.
This has involved moving its main banking systems onto the Banesto platform.
The migration is being overseen by a subsidiary created by the Santander group. The second stage of the IT project, which began this summer, involves developing a new banking system for the bank branches.
Santander bank uses IBM mainframe architectures and IBM's DB2 database technology. It uses a single customer database, from its Banesto subsidiary, for all applications across the bank.
Having a single database has delivered a range of benefits, according to Celenet.
"All of a customer's relationships with the bank, be it mortgages, deposits, cash management, cards, brokerage services, or insurance products, are automatically linked and immediately visible to bank employees. This leads to higher cross-sell ratios, higher levels of customers satisfaction and better operational performance," said Celenet.