Out of the Fire: A Retail Bank Responds to Revenue Threat Through Collaborative Working

Dynamic change

LloydsTSB asked us to deliver a response to a looming regulatory cap on overdraft fees and interest rates. The Situation Rising social and media attention on bank charges for overdrafts had led the regulator to announce a review and a probable cap on administrative fees and interest rates. Revenue from these sources was a significant proportion of overall bank revenue, so a cap had real consequences for shareholders. Whilst waiting for the regulator to communicate its position and compliance deadline, the bank needed a basket of competitive charging propositions that were compliant with the new rules, and also appealing to customers. They needed to minimise revenue impact. It also meant that the company’s legacy technology systems would need new and updated functionality to apply changes to products and get them to market in time. The Impact An aggressive regulatory cap would have a significant impact on bank revenue. In the worst case, annual revenue amounting to £300m could be lost. In addition, the sector shake-up had the potential to disrupt brand positioning, market share and competitive edge across all current account providers in the UK. Uncertainty in the regulators' possible future position meant that any response must be speculative and capable of pivoting as better information emerged. Current practises were not aligned to affect this kind of continuous change. Methodology We stood up a programme that would simultaneously - Devise a series of ‘defender’ business propositions, producing a suite every month in response to the rapidly evolving commercial and regulatory conditions, and to exploit fresh information. - Re-engineer systems within the technical limits of the legacy platform to ensure every pricing lever was configurable, and could be applied to products with the shortest possible lead time from the formal announcement of the new pricing rules. The pace was dictated by uncertainty in both the nature and timing of the new rules as well as the possible extent of revenue impact. That meant the programme needed to work at a drumbeat perhaps four times faster than the bank had been used to. We accelerated by leveraging strong executive sponsorship, a compelling case for change and a clear finance mandate. This sort of change was likely to encounter resistance. To mitigate this, we applied the ‘hearts and minds’ principles of consultative stakeholder management. That meant securing and bringing together every key subject matter expert, making a relevant case for whole teams as well as individuals. With the stakeholder team now invested in the programme, we launched a regular series of fast-paced iterative design and build cycles; a business proposition cycle and a technical build cycle running concurrently, each with active stakeholder participation at its centre. These two interlinked cycles meant that the business team was able to provide a fresh design brief to the technology team, and the technology team was able to demonstrate progress on newly completed levers. We led a monthly exchange as follows: From the business: “Here is what we want to do” From Technology “Here are the new things you can use” Through necessity, we devised and executed an early example of continuous delivery many years ahead of sector trends. The Outcome Several months and six iterations later the regulator reached its decision. The fee and rate constraints were relatively light. The bank was able to quickly and painlessly select and launch a suitable customer proposition, protecting revenue well in excess of the forecasted impact. Through the programme, the business now had a fully configurable platform that significantly reduced cost and time to market for every new product launch and adjustment into future years. The reduction in operating costs provided the means to move quickly to meet new market opportunities.