CIO Profile: Nationwide’s Tony Prestedge on transformational technology

See also: Tony Prestedge on business transformation Tony Prestedge on having no CIO

Nationwide Building Society is undergoing a £1bn business transformation, encompassing business processes and the technology that supports them. Nationwide COO Tony Prestedge says that the infrastructure transformation part of the programme can be broken down into three main parts.

Nationwide has spent over £100m in a new mortgage origination platform that gives applicants a decision much more quickly. Mortgage applications can now be processed within a week, with 10 per cent being resolved at point of sale.

This reduction in decision-time has been accomplished by integrating intermediaries’ systems with Nationwide’s risk analysis applications, so that effectively it is straight-through selling, using the intermediary platform as a channel.

The company has spent a similar amount upgrading its payments platform in December 2011.

Prestedge explains that customers demand instant payment-processing, and that waiting for transactions to complete is no longer acceptable. 20 million accounts can now do instant transfers by way of a faster payments mechanism.

“It’s about bringing to life the idea of real-time banking where customers can say goodbye to having to wait three working days for a cheque to clear,” he says.

The building society decommissioned its datacentre in Wellingborough and opened a new £120m site in Newbury. The new datacentre runs dark, with minimal on-site maintenance, and all of the hardware within it can be accessed from the principal datacentre in Swindon.

The datacentre renewal went hand-in-hand with a virtualisation project and nearly two thirds of the company’s server estate has been virtualised.

Central processes The next phase of this project is desktop virtualisation, removing the need for fat-client hardware in branches.

The datacentre operation will then start to serve as the banking engine, removing the need for end-of-day batch processing and speeding up productivity at the customer-end of the business.

“It’s a shift in mindset around what the datacentre can do in the working day,” says Prestedge. “The cultural shift involved in that change is almost as significant as the operational change itself.”

The benefit in productivity brought about by the infrastructure transformation has allowed the company to close 11 operation centres in the UK alongside a number of other strategic business changes.

Nationwide has sold its Life insurance business and gone into a partnership with Legal & General in that market.

It’s an example of how the company is no longer the product owner in a number of areas. It now partners with other financial institutions, reselling their products but retaining ownership of customer relationships and brand identity.

It has also acquired four regional businesses in the Portman, Cheshire, Derbyshire and Dunfermline building societies and these operations have been merged and are now all based in Scotland.

“As a result we’ve introduced case tracking and productivity management across our processes,” says Prestedge.

“We’ve invested in [SMS] text communications with our membership. So when you apply for a bank account we will confirm by text that the application is received and let you know by text when your cards are going to be issued.”

Texting members reduces the need for membership to contact the building societies with questions and frees up staff to concentrate on the value-added benefits of complex servicing through face-to-face or telephone engagement.

As an example of how this shift has benefited the company, 30 per cent of ISA applications are processed in three months of each tax year.

Maturity processes for ISAs have been brought down from eight to three days at Nationwide because of a common, reliable infrastructure and available staff resources able to cope with this spike in activity at a certain time of the year.

This is just one area where the building society has been able to bring in productivity gains that directly impact on customer satisfaction, and Prestedge claims that Nationwide complaint volumes are around a fifth of those of its same-size competitors as a result of the transformation.

Customer-facing areas of business have been a focus in the transformation with the opening of two new UK-based call centres in which Nationwide has invested in interactive voice response (IVR) systems and increased operating hours.

As a result there has been a 35 per cent increase in call volumes at a flat cost base.

The company has opted not to offshore voice services, although a processing centre in Jaipur, India will open in mid-2012 for non-direct customer services.

Common goals Nationwide launched a new internet bank last October built in .Net, with the clear intention of developing common platforms across all front office activities, whether it is internet, telephony or over the counter at one of its 700 branches.

Architecturally, front office is largely a Microsoft house, with the introduction of a middleware layer supported in the back office by an SAP platform for banking and savings and other specialist platforms for other products.

The decision to replace the company’s 30-year-old Unisys core banking system with an SAP platform for 20 million current accounts was taken as early as 2008.

It will go live for new current account products in Q4 2012, followed by the migration of a further five million current account customers before the company starts on migrating savings accounts until 2014.

“We were really clear that the SAP programme will take five years because the idea you can change the heart of the organisation, the basic product ledger of banking and savings to be switched over is something you don’t rush and it will be something you do once every 30 years,” says Prestedge.

In 2013 the building society will start to explore ways to use the banking engine for other markets especially SME banking. Nationwide already has a lending proposition but this is the first foray into commercial accounts. But Prestedge stressed it won’t launch anything until it is clear it has a proposition that’s attractive.