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 Head to Head
16 August 2007 | ITSM
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Intelligent Banking
In an exclusive interview, Mark Parker, Managing Director at Intelligent Finance, highlights the benefits of putting the decision making process into the hands of the customer

  Mark Parker

IT plays a big role in positioning HBOS’ products both internally and externally. How do products like your internet banking and online mortgage calculators integrate with the wider bank systems?

To ensure Intelligent Finance was able to launch to the market within incredibly short timescales (nine months end-to-end) it had to be fleet of foot and it had to find new and innovative ways to deliver the required software. The offset algorithm used to calculate offsetting benefits was incredibly complex and did not exist in the form Intelligent Finance required. Therefore the Offset Mortgage Engine which forms the core of IF’s system was developed from scratch.

However, in order to minimise our costs and achieve that nine month launch, we re-used key components of the Halifax estate such as the Current Account system. We continue to adopt this approach whereby we will develop to gain competitive advantage in products but also buy from third parties or utilise systems developed by other parts of the group to reduce our costs. One recent example of this is our adoption of the group wide Common Processing System which we are now using for Workflow Management. This agility allowed Intelligent Finance to launch into an untapped market, gaining huge first mover advantage and continue to innovate for its customers.

A mortgage calculator was launched recently on HBOS’ Intelligent Finance product website. How is your customer base reacting to this increase in direct interaction with consumer-facing IT systems?

Early signs are looking excellent! Whilst it’s too early to quantify anything in a precise manner, it is clear that customers are now more willing, and indeed likely, to self service their account than call in. This is terrific news since it frees up our contact centre for those calls that require human intervention. So everyone is benefiting - customers who self serve are gaining immediate insight into the options available to them and can make an immediate decision about how they want to use their account and they can click in and out of options as frequently as they wish with no cost to them. Broker feedback has been tremendous - they love it - so much so they are even singing its praises in trade publications. For the first time, the calculator allows the advisor to give line of sight on how savings impact SVR, interest charged and term saved.

As an example, someone choosing to keep their ISAs and current account with the same provider and overpaying £50 per month into a typical 25-year IF mortgage could save almost £80,000 in interest, and knock almost five years off their term (see Figure 1). The effect of this over the life of the mortgage would be to deliver an effective rate of just 4.9 per cent. Proof, if any is needed, that looking at headline rate alone is folly and that the longer term value of offset is really coming of age.  

Intelligent Finance is described as a 24/7 financial service provider, implying that customers have access to their accounts and products all day and every day. What support system do you have set up to deal with customer queries, website problems and other customer care issues?

We take supporting the web usage of our customers seriously. We regularly remind them about fraud and how they can secure their data and we have 24/7 support for customers whose credit/debit cards are lost or stolen.

Over the web it is 24/7 - we pride ourselves in minimising downtime to web based services through use of in-built redundancy within our IT systems. Following an initial, extensive training programme for our Customer Facing colleagues, each receives specific training relating to the system improvements delivered by our quarterly IT systems upgrades. Should Contact Centre colleagues be unable to help a customer with their query, we have a dedicated helpdesk of IT colleagues who provide second level support.

Your Evolution project has provided a “step change” in the way that you talk to your consumers. Can you elaborate on the changes the project has brought about and how they’ve improved performance?

The journey starts for a new customer with our new offset calculator, this allows the customer to put in their details and find the best option for them. We continue this through a revised application process where offset is at the heart of the application and no longer the last stage. Because our existing customers won’t have gone through this new journey, we are writing to all customers to explain this to them. For these new customers and for our existing customers, we have created a new screen, so every time they access their plan on the web, they can view how much they have saved with offsetting which is also re-confirmed on the customers annual statement. Existing customers can use the offset calculator on IF.com. However, if they want something very specific to them, they can call in and IF colleagues can take the customer through various “what if” scenarios - for example, what if I moved my ISAs to IF, would it reduce my term and by how much? We can undertake any such analysis for our customers.

What IT best practices does HBOS employ and, more importantly, how do they fit with the compliancy rules for financial services institutions?

The need for effective IT Risk Management is implicit within the development, implementation and ongoing management of the IT service. Intelligent Finance depends on these IT services for its survival as a Telenet/Internet bank - indeed, the effective management of these services is a key requirement to the strategic success of the bank as a profitable business.

Intelligent Finance IT Services has adopted ITIL best practice in order to deliver its IT Service Management. Use of repeatable processes and a focus on getting to (and resolving) the root cause of problems is allowing us to improve customer service and lower our costs. Our Service Managers either have the ITIL Manager’s Certificate or are sitting the exam this year.

HBOS policy for IT Risk Management is linked directly with the Group Operational Risk Management Policy, and ensures consistent risk management, reporting and decision making within the IT service. By complying with the policy, Intelligent Finance will be able to provide assurance that the approach to IT Risk Management is aligned to similar processes within Group and other business divisions, promoting compliance with both external regulatory requirements and internal standards.

HBOS uses Mercury TestDirector to detect problems with the IT systems. According to reports, this has reduced final phase testing by almost 20 per cent. Is this considered a success by HBOS and has the experience altered the way that the business views large-scale IT solutions?

IF makes extensive use of TestDirector for both test script management and defect management. This tool allows us to have all of our test scripts in one repository, ensuring maximum reusability and consistency in testing. The defect management tool allows us to directly link test defects back to individual test scripts, thus allowing more rapid root cause analysis. Financial Services has concentrated on the automation of regression packs and health checks. In this field, we have been able to reduce our costs by 54 per cent and pay back the investment in automation within one year.

Additional benefits from TestDirector are that our MI has significantly improved and we can now provide real-time information on testing progress throughout our phases.  We have rolled TestDirector out into User Acceptance Testing, allowing that team to record the impact of each unresolved defect on the production environment and we are using it to hold a repository of known production faults that reduces the raising of duplicate defects. TestDirector now provides a single reference point for development and business teams. Furthermore, our defect management process has been streamlined and administration overheads have more than halved since the days of multiple spreadsheets of defects held by each team involved. As a result of using TestDirector, IT has now become a more consistent and higher quality deliverer of software solutions with improved preparation for business change.

HBOS Financial Services introduced a 140-strong test team in 2003 to remove duplication of effort, reduce cost and build a core centre of expertise. How did you go about setting up this team and where did you recruit the members?

Between 2003 and 2005 we merged disparate testing teams into one and rapidly grew it in order to take on the challenge of the Shared Service Programme which consolidated business on to a single platform. The team grew to over 140 in size, of which half was made up of the original teams and half of contractors taken on for the programme and largely retained until we started to replace them with staff from our offshore partner in 2006.

At the time, reduction of duplication and cost was secondary to having a team of sufficient strength and capability to undertake the work and the professionalism of the team has been massively improved by undertaking a programme of education through the ISEB Foundation and Practitioner qualifications in testing. HBOS Financial Services have had a 100 per cent record in taking these qualifications. As a result of these changes, the unit cost has markedly reduced. From 2006 to 2007 there has been a 11.5 per cent reduction in the average daily cost of testing.

And what results has the test team delivered? Has it paid for itself in the three years it’s been in existence?

An obvious improvement from the team has been a reduction in the system test windows. At the start of the Shared Service Programme  these were normally 12 weeks in length and that has now been reduced to ten weeks for the highly integrated systems and even less for more stand-alone systems. That improves our speed to market and we are continually looking at ways to reduce that figure still further. 

A recent example of the success of the new team is in the quality of software moving through the cycle. Defects per test in the user acceptance phase were reduced from 20 per cent to five per cent, which clearly improves the quality of the end product and the overall cost of delivery. 

The ‘A-Day’ pension legislation that was introduced by the British Government in April 2006 required some major changes to be made to HBOS’ working practices and IT systems. A year on, how successful have those changes been?

The systems implementation and process changes at A-Day all went extremely well. We sailed through this major change with barely a blip to the quality of our Customer Service, which was a result of the hard work and planning from across the business.

In the year since A-Day we are seeing the benefits of Pensions Simplification: strong growth in Individual Pensions has been a major contributor to a very successful year for Clerical Medical’s UK sales; sales of individual pensions to high net worth customers have increased significantly; and the simpler regulatory regime and streamlined servicing processes have contributed to the significant improvement in Customer Service. 
Does HBOS outsource any of its IT systems work? If so, what are the appraisal procedures in choosing a vendor and what monitoring systems do you have in place?

IF does the majority of its development and support activity in-house, utilising the centres of excellence in HBOS, such as centralised infrastructure support and group wide applications development. This provides us with low cost and industry best expertise in banking systems development and support. Outsourcing is used where it is to support an externally supplied niche system or to manage peaks of development demand. In this instance IF would use HBOS group procurement policies and processes to select and manage the supplier.

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