Lloyds bank on master data management for business integration in M&A

Two years ago, Lloyds Banking Group's merger with HBOS doubled the size of the company. That move radically complicated the company's longstanding effort to put master data management at the heart of its business strategy and gain a single customer view.

It's a goal Lloyds has been working toward for 15 years, Chris Farnworth, lead information architect for Lloyds Banking Group, told delegates at IRM UK’s spring MDM summit in London. It is a complex organisation. The firm now has 36 million customers and 120, 000 employees. Twenty-two million of the group’s customers are served by the retail division, which holds £190 billion in savings. The other three divisions – wholesale, insurance, and wealth and international banking – have their own distinct ways of operating.

“One key challenge is that we have disparate systems that have originated in different divisions; [and so] we are trying to produce a common business model that gives us the flexibility to cope with all of those,” Farnworth said. A history of intense M&A has “created an IT landscape of huge complexity. We had 2,000 applications in use three years ago. Every time we wanted to make a change, it was excessively complicated; we were hamstrung.”

Farnworth drew attention to two changes made at Lloyds, under the aegis of its MDM programme, over the past 18 months. In wholesale, the firm had, he said, “a multiple distributed architecture.” The company used IBM Infosphere MDM Server to create a master system of record. “Everything else is slave to that. Over time, we reduce activity in the subordinates and transfer to the master, though [they] can keep some autonomy.” Lloyds also used IBM MDM Server to cohere information that had been “low level, and policy driven, with data embedded in many systems” in the insurance division.

A relatively distinct issue for Lloyds is the plethora of brands. “We don’t want a Lloyds TSB customer being able to see their Halifax accounts in a Lloyds branch,” Farnworth said.

However, Lloyds Banking Group is not unique in its industry, either in terms of business line of march or the resultant technology implications. It is, though, the biggest retail bank in the UK, and 41% owned by the taxpayer. The group’s first quarter interim management statement acclaimed its integration programme, which was said to be delivering annualised run-rate cost savings of £1,570 million per annum, and is on track to deliver £2 billion of run-rate cost savings by the end of 2011.

“Banks have evolved from being very account-centric to being customer-centric," Farnworth said. "The critical thing is how to do that. And master data management helps.”

At his firm, Farnworth said, leadership has aimed for “a consistent and aligned data definition that allows simplification and accelerates the pace by which we can move to a customer-centric organisation.”

In applying MDM, Lloyds has been guided by some core principles, including the alignment of channels to the same service model, the making of a “single customer view,” the underpinning of their analytics programme and product bundling.

“We don’t focus on everything,” Farnworth said. “If an IT programme is not strategic, we don’t govern it too much. With 400 IT programmes in play, the key lies in orchestrating them to optimise their strategic value.” As for customer data management, “from inception, it all needs to be aligned to the strategic end game [of gaining and sustaining a single customer view].”

The bank introduced its first computer system in 1959. Since then the “relentless, ongoing” gauntlet to IT has been to keep pace with growth, especially growth by acquisition. This has left an enduring problem of scale, with 3,000 UK branches, 8,600 automated teller machines, 8 million online banking customers, and 20 call centres. Any fundamental changes to IT infrastructure need to be non-intrusive; "it's critical to have a sustainable model,” underscored Farnworth.