And now for the recovery

With more than £9billion in government-backed lending, 33,000 capital repayment holidays and 20,000 fee-free overdrafts arranged during the first few months of the pandemic, the UK’s biggest bank by customer numbers kept calm and carried on.

Under the hood at Lloyds Bank, an innovation policy best described as ‘relentless incrementalism’ – an approach to digital transformation designed to avoid the cardiac arrest inflicted on organisations by ‘big bang’ migrations – was proving its mettle, particularly when it came to business banking.

Around £2.4billion of a £3billion digital transformation plan had been spent by then on technology innovation and changes to working practices across the organisation since 2018.

“A lot of that technology investment has gone into things like robotics, including around the loan process, where we’ve improved the time of getting approval to customers. So, with the government’s COVID-19 Bounce Back Loans, for example, the majority of customers received their funds within 24 hours,” says Andrea Melville, managing director of commercialisation and propositions in

Lloyds Bank’s global transaction team. Now, as UK businesses face the long, painful haul back to a hoped-for recovery, she is conscious that the sum of all the parts that the bank has been incrementally improving over the past two and a half years, must add up to s o much more if it’s to help businesses whether this storm.

According to the most recent Lloyds Global Transaction Team’s UK Recovery Tracker, which has taken the pulse of the stuttering economy over the summer, 13 of the 14 sectors it monitors saw stronger growth than their global sector equivalents in August. The caveat is that they were almost all hit harder than their international peers, so they have further and faster to go.

Melville, who is responsible for a number of strategic initiatives across the transaction banking product suite, covering application programming interfaces (APIs), data, and blockchain, believes the bank’s APIs, many developed with client input in the Lloyds Bank lab, will be critical in helping that recovery.

“Lloyds Bank has a really strong cultural curiosity, which results in lots of proof of concepts, lots of pilots, lots of research, and lots of listening. We focus on trying to understand clients’ needs and clients’ wants. We’re constantly trying to reduce friction, and openly evaluating whether or not we would look to buy, build, or partner to deliver what we need,” says Melville.

That’s resulted in a cascade of API-supported business tools being developed over the past year, including a payables API using the UK’s Faster Payments rail, which has now handled £1billion in transactions; a new asset finance API for brokers; and a trade tracker API that provides visibility of deals in the supply chain, all of which can help in the immediate aftermath of the crisis.

“What we’re seeing is trends that were already there in the market before the pandemic are definitely accelerating on the back of it,” says Melville. “There is a lot we can do to help chief finance officers and chief information officers around leveraging APIs – getting automated key treasury activities, such as balance sheets, statement retrievals, sweeping, FX hedging – bringing all that together.

“On the data side, it’s about bringing it all to a single spot – it could be banking data and accounting data – which will create a much more holistic view to help with working capital. 

the recovery

Andrea Melville, MD of Commercialisation and Propositions in Lloyds Bank’s Global Transaction Team, believes adopting an API-first approach and working ever closer with fintechs will help build a path out of the crisis for business

 “When it comes to cash management us leapfrog to new technologies, they and payments, in addition to the payables can also help us with a test-and-learn API, we have a new platform called Gem, approach, one aim of that being to reduce which has market-leading capabilities, our cost of change, both in terms of time designed for our bigger clients. It offers a and financial expenditure.” lot of internal analytics and is designed to Like many legacy institutions Lloyds be a real aid to decisionmaking.” Group traditionally adopted a ‘castle and

The bank’s existing International Trade moat’ approach to innovation; working Portal gives customers background market internally on solutions without much knowledge and practical resources to equip engagement with fintechs outside the them for international trade, and, given not bank’s walls. Now it’s recognised that just the impact of the pandemic but Brexit fintechs can help it bring propositions to too, it’s a tool that she’s keen to promote. customers much faster than it could do on

“This is a time in the market when its own. An example of that is accounting there’s a lot of potential disruption to software provider OneUp with whom supply chains, so it’s really Lloyds Bank is currently important that people We’re conducting a live pilot. understand more around what their options might be for international constantly and openly “Cash flow management and really understanding what’s happening in your partnering,” says Melville. evaluating “We need to make sure that we’ve got the right insight, both for the bank’s whether or not we would look own internal decisions, and to buy, build, or to help businesses, too. To help them manage cash flow, but also to understand partner to deliver what we need this external market which is constantly evolving.”

As well as providing products that improve the customer experience, Lloyds

amount to the equation. They can help Bank’s strategy has been to simplify its IT data is so important right now,” says architecture and use its own data more Melville. “Businesses really need to be efficiently; to create a scalable and resilient looking to use data as a driver of their infrastructure and enhance multi-channel strategy and decisionmaking.” customer engagement. She credits the bank’s design team with

“We can’t only look at one side of the having a ‘strong cultural curiosity’. coin; we need to make sure that we’re “It results in lots of proof of concepts, looking at the frontend, but also the lots of pilots, lots of research and lots of systems that sit behind it,” says Melville. listening. We focus on trying to understand “Customers need great digital onboarding, what clients want. We’re constantly trying they need great UX, but they also need to reduce friction, and we’re openly end-to-end processing and automation.” evaluating whether or not we should buy,

At the heart of its internal transformation build or partner to deliver what we need.” is creating agile workflows. It’s currently working with Validus, for

“Around a third of all of our change example, on how it can import data from programmes are delivered through agile its customers in a standardised way. methodology and we’re on target for “We’re looking at fintechs that do things that moving up to about 50 per cent by around synthetic data, data matching, year-end,” says Melville. “But we have to graph technology,” says Melville. “It helps balance providing new propositions and us better understand the benefit for our services with maintaining relationships customers, it helps us understand the use with customers we already have.” cases, the risks and the mitigants.

Partnering with fintechs is a vital part of “Banking has a sourcing model that really that, according to Melville. “It adds a huge needs to be faced into,” she observes. “There are lots of governance and security standards, ISO certificates, penetration tests – all things that we need to make sure we’re delivering to. When we look at how to make partnering more fintech friendly, it’s about creating the right rails. But fintechs can really help with this too, by making sure that they’re more partner-ready, by understanding the industry standards held by banks, particularly around security.”

TECH TO THE RESCUE In common with many others, Lloyds Bank has taken a big hit from the pandemic-related crash – it reported a second quarter loss of £676million for the three months to June – while at the same time coming under pressure to respond to extraordinary demand from government to support businesses and individuals also reeling from COVID’s impact. Banks were

From response to recovery:

Lloyds Bank is addressing the next stage

already trying to reduce costs; now they are trying to deliver new services quicker and reduce costs. But signs are that they are not taking their foot off the technology pedal.

A Lloyds Bank survey released in September showed that almost nine in 10 senior leaders at financial institutions saw tech investment as a strategic priority for the next 12 months; almost two-thirds plan to increase investment in their own technology and core systems; roughly a third will focus on fintech offerings.

“Since the pandemic, we’ve done things like upgrading the business banking online lending tool to enable faster decisionmaking, but also free up relationship managers’ time, so that they can really be there to help customers,” says Melville. “We’ve also had to redeploy a significant number of colleagues across the operation teams to make sure we can meet demand, and that we can strengthen critical processes. Now, for us, the next stage is helping Britain recover.”