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Tuesday, April 16, 2024

Simply the best

The UK’s biggest building society has risen from digital ground zero to become one of the fastest growing digital account providers on the back of a £4billion-plus transformation strategy to create ‘a building society in your pocket’. It’s a challenge, but it doesn’t have to be complicated, says Deputy CEO Tony Prestedge

It’s easy to forget the breathtaking pace of digital innovation in financial services over the past five years.

Back in 2014, when Tony Prestedge was helping to oversee one of the largest replatforming programmes in Europe for Nationwide, his young son – clearly, a CTO in the making – wanted to cut chips out of his dad’s payment cards and stick them on the back of his wristwatch… it was to be another 12 months before we saw Apple come up with something a little more sophisticated.

“Mobile banking was still pretty nascent, the internet bank, while it was being used really widely, was largely about servicing, contactless hadn’t launched… there was no real concept of digital payments in the marketplace,” recalls Prestedge.

Like Prestedge’s son, Nationwide wasalso thinking ahead of its time. And its technology arc since, with an extraordinary commitment to spend £4billion over five years, has already placed it at the head of the legacy race: a mutual society founded more than 170 years ago is now one of the fastest growing digital account providers in the country. But its approach has been singularly different.

That stems, says Prestedge, from the Nationwide’s history of being a cheerleader for the people. One of a diminishing number of building societies that has hung on to its mutual status, it saw many of its fellows, including Halifax and Woolwich, convert in the first big wave of demutualisations in the 1990s. Among only around 40 left in the UK, Nationwide is now by far and away the biggest mutual by every measure, including its physical estate, with four times as many branches as its nearest rival and 700 times more than those of the smallest. It recently pledged to retain a branch in any town or city where it currently has a presence for at least two years as it works through digital the society’s transformation programme.

“The view that we had strategically is that technology would make things possible, but people would always make it matter,” says Prestedge. “Institutions have spent a decade putting technology between people to drive simplification and cost efficiency. Those things are important to make sure you’re a sustainable organisation. But, for the first time, technology is being used to bring people together, rather than pull them apart; to have conversations, not just do processes.”

Prestedge points to a WhatsApp service currently being trialled with customers, which encourages just that by giving the  direct access to high street staff.

“You can see pictures of our colleagues in the branches and you’re able to choose who you want to engage with,” explains Prestedge. “By making staff accessible through the app, you start to humanise the technology. Even if you never have a conversation with that person, you have a face to put to a name – it gives you that same sense of confidence [as meeting them physically]. If you humanise the technology by bringing people to the fore, rather than engineering them out, you start to see the thing that we’ve all been talking about for almost a decade. That is, channels properly blending, so the app just becomes an entry point to the organisation. Bringing app-based technology together with the physical environment is the thing that’s making the brand so special.”

Ultimately, though, it’s the members who drive those technology choices.

“They are the architects of our investment,” says Prestedge. “They have said to us, consistently: ‘We adore the people in your branches – they are the hallmark of your service. But we also want to engage with you through technology. We want to be able to have our building society in our pocket’.”

Prestedge believes Nationwide’s selective approach to innovation is validated by the society retaining its premier position in Forrester’s Customer Experience Index. Based on a survey of 9,033 UK adults, it measures how well a brand’s customer experience strengthens brand loyalty.

“We could put more and more function into the technology, but the reality is it doesn’t get used,” says Prestedge. “You should develop your product to deliver the things that the membership’s asking you to deliver and then make those things really accessible and usable and experienced in a way that makes sense. The fact that it’s uncluttered means, I hope, that what people are experiencing in the physical branch network is great people-based service and, through the technology, real simplicity of use.”

The KISS principle

Keeping it simple has nevertheless necessitated some fiendish reinvention of the way the society operates. So far, it’s involved  upgrading and simplifying the organsiation’s data estate, including reducing data stores from 20 to two while increasing investment in AI and machine learning to improve analytics

and give more insight; outsourcing IT for the first time; and implementing Microsoft technology in the front office and SAP at the back.

In line with its mission to deliver benefits across society, the move to an off-the-shelf IT policy has included investing in early-stage start-ups through a £50million venture fund. Most recently, Nationwide took a stake in Canadian voice analytics company Scaled Insights, which prompted it to move its HQ to Leeds in the UK. Scaled Heights uses behavioural AI to analyse more than 130 different variables in an individual’s speech patterns to give an idea of their personality traits; understanding what motivates them means organisations can respond in language that is most accessible for the customer, leading to a more personalised service.

Scaled Heights was the society’s fifth investment target in both back office and customer-facing, third-party services. In fairly short order, it has also taken a minority stake in UK-based personal financial management app Moneyhub and in proptech startup Acasa, UK university spin off Hazy, which anonymises data to ensure companies are compliant with data sharing rules under the General Data Protection Regulation (GDPR), and payment request service Ordo. All are a result of Open Banking.

“I believe the concept of Open Banking, where you own your own data and have the right to share it in whichever ecosystem you choose to bring about more value for you or improve services for yourself, will be more transformational to our industry than the internet and mobile banking has been thus far,” says Prestedge. “Internet and mobile banking gave you access to services you could have accessed physically. What Open Banking does is completely empower you to use your data in a way that makes sense for you. Consumers – our members – will have to get comfortable with the security of that and my view is that brands that people recognise and trust will win out. How customers might use data in a way that helps them, is something we will learn over time.”

Prestedge believes that three things determine the development of  Open Banking services.

“First, whether or not you, as a customer, trust an organisation. Do they use your data ethically? Do they use it in a way that you feel comfortable with? Secondly, customers will only see value in exchanging their data if they get something in return – how many apps have we all downloaded and then deleted within two weeks; an app  needs to bring additional value to you constantly. And, thirdly, the service needs to be something that’s omnipresent, not something you go back to monthly, but you use every day of the week in the way that helps shape and inform your life.”

Both Hazy and Ordo will support Nationwide’s move into business banking for small and microbusinesses later in 2019, a journey that began with trials in 2018 of Mettle, a banking platform for SMEs developed with 11:FS and Capco. The Mettle mobile app will allow customers to open a business current account in minutes, forecast their business performance, create invoices from their mobile phone and provide reminders for chasing payments.

“Two and a half million of our customers have an SME. Many of those small business clients will be on the road, doing jobs where they need to bank outside of normal facilities – so you have to be there when they need you to be through technology,” says Prestedge. “But what they really want is for the bank to connect to them as people, so our transactional bank facility will be available through the branch as well as digitally. Then we will use Open Banking to bring about other services, such as  factoring and asset finance. We can start to introduce people to best-in-class products that we don’t produce ourselves, rather than asking people to tie themselves to a single institution.

“We couldn’t have done all that 12 months ago, because one of the reasons we’ve not been in SME banking before is the cost of entry,” says Prestedge. “Open Banking will allow us to launch what I believe will be the best business bank in the UK for SMEs. But we’re not going to build it on our current legacy technology, we’ve been clear about that. That means we can start to build a Cloud native service, use microservices, make sure that the frontend experience is separated from the back end, so you’ve all the right security and resilience in terms of the core ledgers. It’s helping us transform our operating model, because we’re learning how to build new businesses, outside of our core.

“What customers want from us for the future is what they’ve wanted from us for the past 170 years,” says Prestedge. “That’s an organisation they can trust, with an ethical set of brand values and people who stand up for something different. Who deliver a great service that contributes not just commercially and economically to the health of the building society, but to the health of society as a whole.”

This article was published in The Fintech Finance Magazine: Issue #12, Page 42 & 43.

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