Lloyds Banking Group plans to cut hundreds of millions of pounds in technology costs by switching new a new platform developed by a startup, according to reports in the Financial Times.
The group has begun discussions with regulators over the transferral of data on around half a million customers from a discontinued business, Intelligent Finance, to test a system developed by Thought Machine.
Lloyds closed Intelligent Finance to new business in 2014 following requests from the European Commission to reduce its market share.
The banking group has already cut more than 30,000 jobs and closed around one-quarter of its branches since 2011, and if trials are successful, the high street lender could carry out further transfers across all of its businesses in the next five years.
The move comes amid growing competition from online-based challenger banks and could enable the group to offer new, more personalised products in tune with the services offered by banks such as Monzo or Revolut.
Many traditional banks are currently faced with the burden of legacy IT systems, and according to an internal company presentation seen by FT, Lloyds acknowledged that “incremental improvements” to existing It infrastructure “can only go so far.”
Recommended: 10 Trends Driving Cyber Security in 2019
In November last year, the banking group invested around £11 million for a 10% stake in Thought Machine, which was established by former Google engineers.
The company’s core banking platform, Vault, is cloud-based, which could make it cheaper for Lloyds to run and scale up in comparison to older systems. The platform also aims to provide more detailed customer data insights and facilitate the development of new products at a far quicker pace.
Lloyds currently spends more than £2.2 billion annually on IT and IT improvements. Under Vault, the group could reduce costs by more than £750 million.
It already has one of the lowest cost/income ratios among all of the UK’s high street banks and aims to go from spending around £47 of every £100 in revenue to the “low 40s” by the end of 2020, the presentation suggested.
The move by Lloyds has prompted concern among trade unions. Speaking to FT, Mark Brown, general secretary of the independent BTU union, said: “The bank knows when and where jobs will be lost as a result of the implementation of Thought Machine’s core banking platform and it should publish that information immediately.
“Hiding that information from staff is unacceptable.”
Lloyds has said it intends to retrain staff while implementing and investing in new technology, and the banking group said it hoped to avoid compulsory redundancies.
In a statement on its website, the BTU said the “bank’s plans go well beyond Intelligent Finance” and that it is currently building the capabilities and processes to show that Vault can be the group’s generic banking platform – developments that raise the union’s concerns.
“If that migration (Intelligent Finance) is successful, it will be followed by Birmingham Midshires and Scottish Widows Bank customers,” the union said. “The group’s core retail brand customers in Lloyds, Halifax and Bank of Scotland, will follow thereafter.”