The Royal Bank of Scotland has announced a major project to rationalise its legacy IT estate, aiming to lower costs and improve resiliency through a 50 percent reduction of its technology platforms.
The cost reduction strategy is expected to bring about a total of £1.1 billion cost saving on IT and operations as RBS plans a major reduction in its overall 2013 cost base of £13 billion to less than £8 billion by 2017.
“By reducing the number of platforms in use we can focus on their resiliency and reduce the overhead in their ongoing management,” the bank said in its full year results for 2013.
“We will maintain a similar level of investment spending but directed at customer-facing process improvements, instead of maintaining inefficient legacy infrastructure.”
The simplification process will include an 80 percent reduction in the number of core banking systems used across the banking group, from 50 down to around 10. The bank’s 80 electronic payments systems will be reduced to approximately 10, with a bank-wide payments platform introduced to “support all segments, geographies and payments schemes”.
The decommissioning of legacy applications will begin in the second quarter of 2014, and continue through to 2018.
The IT changes follow a strategic review announced by RBS in November last year, as it aims to improve its customer service levels by improving its IT which CEO Ross McEwan claimed had been damaged by "decades" of underinvestment in technology systems.
Other initiatives include the introduction of a common data platform for analysis and reporting. This will involve reducing the number of data stores from 15 down to two for UK retail customers, improving the quality of data, and investing £39 million in analytics tools and capabilities to help reduce “complexity, cost, error rates and wasted front line effort”.
Further investments in digital channels are expected in 2014, as RBS’ retail banking division saw 2.9 million customers using its mobile app during 2013.
The bank also highlighted aims to improve the resilience of its systems. Like most major banks, RBS has had significant problems with its legacy IT, leading to a number of high profile outages, most notably an incident in the summer of 2012 which resulted in the launch of an investigation by the Financial Conduct Authority (FCA).
The bank has promised to focus on the “safety” of its systems and “reduce the number of incidents and minimise the impact of them on customers”. This will involve re-engineering critical IT processes, implementing enhanced Service Management process and risks controlled with advanced tools, simplifying batch processing and the introduction of automated, real-time dashboards to alert IT staff to issues.
The bank has also indicated it would stop “non-aligned in-flight/planned projects” and accelerate “aligned in-flight projects”.
“We now have a strategy to deliver a sustainable bank with a clear ambition: we want to be number one for customer service, trust and advocacy, in every one of our chosen business areas by 2020,” CEO Ross McEwan said in today’s results.
Details of expected job cuts were not commented on.