Leveraging our investments in information technology

The safety, stability, functionality and efficiency of our IT services

The long-term benefits of our modernisation and digital journeys will continue to strengthen our competitiveness, resilience and agility in support of the group strategy. As we enter a more fast-paced and in some cases a more complex era of IT, we are well-positioned to partner with the group on its journey to realising its vision in the medium term.

Brenda Niehaus, group chief information officer

Why this is important

Our vision is to radically reshape our IT capability to deliver an exceptional customer experience. The customer is at the heart of everything we do and the primary aim of our IT transformation journey is to ensure the stability, availability and efficient functioning of our banking systems to protect our customer franchise and underpin the sustainable future of Standard Bank.

We have achieved a number of important milestones in the implementation of our IT transformation programme, which is designed to create a digital bank able to adapt continuously to client demands for increased availability and higher levels of flexibility and agility.

In response to the speed at which customer demands are changing, we are enhancing our customer interfaces and introducing digital products and services, while replacing our legacy systems. In 2015, we continued to strengthen the core banking foundation that underpins the group’s strategy and we implemented several programmes to improve the quality of our service to clients.

The transformation of our IT landscape is replacing ageing legacy systems with new technologies that position us competitively in the changing world of financial services. Implementing a programme of this magnitude would not have been possible without also changing the way we work in IT and the way Standard Bank employees interact with the new systems.

Our vision is to radically reshape our IT capability to deliver an exceptional customer experience.

How we manage this area

Strategy

Following a benchmark of IT performance and costs performed by McKinsey in 2014, focus continues to be placed on improving efficiencies in ‘run the bank’ costs, and delivering more for less in ‘change the bank costs’, to bring these costs within benchmarks. The improvements are being driven by a four-year transformation journey. We have made good progress, achieving our objectives for 2014 and 2015, and are committed to achieving the targets set for the coming years.

The IT strategy is supported by four pillars:

  • Quality of service through brilliant basics: Achieving continuous improvements in the quality of service to customers in terms of availability, reliability and security.
  • Responsiveness to market: Leveraging innovative technology and new ways of working to achieve higher levels of agility, flexibility and responsiveness.
  • Affordability: Managing costs by driving a lean IT operation and by embedding commercial pragmatism.
  • Sustainability as the foundation of client excellence: Making Standard Bank IT an aspirational destination for IT professionals and embracing our diversity, social and ethical responsibility.

In executing the strategy, we measure progress against delivery and budgetary commitments. There are opportunities to simplify and rationalise our IT landscape to reduce complexity and enable innovation and we have developed clear architecture principles to accommodate the duality of a fast-moving competitive environment and the need for a standardised, stable core. One of the key principles in the remodelling of our IT is to accommodate social, mobile, data analytics, cloud technologies and the internet of things.

Cloud computing is becoming a global commodity that is increasingly used by a wide range of industries including banks. We are progressing in our journey to adopt cloud-based solutions where appropriate and within regulatory guidelines. We will continue to mature our cloud strategy going forward.

IT governance

The advancement of IT has brought about rapid changes in the way businesses and operations are being conducted in the financial industry. IT is no longer a support function within the organisation but is a key enabler for business strategies including reaching out to external customers and meeting their needs. As technology becomes increasingly important and integrated into business processes, the need for adequate and effective governance and management of both IT resources and any constraints becomes imperative.

The group chief information officer (CIO) is a member of the Manco. The business unit CIOs report to their chief executives and the group CIO to ensure that the IT strategy is aligned and integrated with the business strategies. The group CIO and IT executives are suitably qualified, have access to the board and executive management, and serve as a bridge between IT and the group. The IT operating model has been enhanced with a number of key executive appointments.

The group’s IT governance structures continue to strengthen with significant value and alignment being achieved through robust executive and non-executive oversight and support for IT. Independent subject matter experts continue as co-opted standing invitees to the group IT (board) committee. They submit an independent review of our IT governance domains to the board for its consideration. Key observations for this period were that the group had made significant progress in governance, management and improvements in IT operations and that group IT was progressing well on its journey to become a mature, well-run and leading IT organisation.

Mitigating risk

We consider our top IT risks as those that could have an adverse impact on the achievement of our IT and business objectives. These include risks arising from cybercrime, excessive rate of change, disruptive technologies, organisational health, availability of quality data, third parties, business disruption due to system failure and any reputational impact.

These risks are mitigated through various controls which are implemented by management and closely monitored by the group IT risk and compliance committee. We continuously review and invest in our security systems and risk management processes to ensure that our customers and the bank are well protected.

Availability and stability of systems

In the new digital era, customer expectations include ‘always-on’ banking anywhere in the world. This has resulted in a shift in our resilience designs as we adapt to the significant increase in customer expectations.

Our overall IT stability was acceptable in 2015 with a record number of transactions both in terms of volume and value successfully processed. It is a reality that a certain amount of instability is unavoidable during periods of significant change to IT systems and there were two high profile outages resulting from hardware failures. These outages impacted customers as a number of online services were not available for several hours. Our response confirmed that our business continuity measures are sound and that we have the resilience to recover from major system failures. The group sets recovery and business resumption priorities, and contingency procedures are tested and rehearsed so that interruptions are minimised.

Ongoing focus was placed on ensuring stability and reliability in ROA in 2015. While there were service interruptions in some of our operations as a result of failures in telecommunications, power or IT systems our on-going focus on stability has resulted in improvements across the continent.

Specific remedies in response to the above mentioned outages and ongoing resilience initiatives have led to an improvement in system stability. In keeping with our quality of service objective, system availability, reliability and security are a top priority for executive management within IT and we remain confident that our initiatives are having the desired outcomes.

Employees and skills

In this digital era, there is a significant shift in the skills required within IT. An engaged work force is a critical success factor in the delivery of our sustainability objectives and there has been a strong drive to change the culture in group IT and to make it a great place to work. There are several different initiatives that support this drive, for example, lean IT, continuous improvement initiatives, innovation campaigns, etc. Our ambition is to ignite employees to a common purpose (the customer) and to re-skill and future-proof for emerging technologies and new ways of working.

Agile software development practices continue to deliver substantial value.

The practices are augmented by disciplines inherent in the DevOps professional movement, namely culture, automation, measurement and sharing (CAMS), and are paving the way for continuous delivery in select environments.

Standard Bank chaired the first DevOps community day to be hosted in Africa. The event included South African banks, telecommunication companies and universities. The CEO and CTO from Chef (a provider of DevOps tools) in the United States were the keynote speakers.

Significant focus is placed on understanding and influencing university curricula to align to the changes in the IT environment. Certain IT executives participate on university IT advisory boards and meet regularly with the universities to discuss any gaps between academia and business relevance. We have sponsored 10 honours students at South Africa’s Wits University for an Honours Data Sciences Programme. Group IT has met with the University of Pretoria to develop a Master’s level IT degree that will be conducted onsite for talented employees who qualify and wish to further their studies.

Opportunities and challenges

Opportunities

  • Building a digital bank able to adapt continuously to customer demands for increased availability and higher levels of flexibility and agility.
  • Improving efficiencies in ‘run the bank’ costs and delivering more for less in ‘change the bank’ will bring costs within benchmarks.
  • Simplifying and rationalising the IT landscape to reduce complexity and enable innovation.
  • Agile software development practices which pave the way for continuous delivery in select environments.
  • Cloud-based solutions where appropriate.
  • Re-skilling and future-proofing our workforce for emerging technologies and new ways of working, and making Standard Bank IT an aspirational destination for IT professionals.

Challenges

  • Ensuring that innovation and the changes required to remain competitive do not compromise the stability, availability and efficient functioning of our systems.
  • The increasing pace of regulatory changes impacting financial services.
  • The increasing threat of cybercrime.
  • The shortage of IT specialist skills.
  • Achieving the IT transformation journey targets that have been set for the coming years.

Performance overview

Implementation and renewal of IT systems

Underlying our ability to execute our strategy in a digital financial services environment is the modernisation of our core banking platforms in South Africa and the rest of Africa. We have invested heavily in transforming our IT platforms from a complex legacy estate to a simplified and standardised ecosystem. Competitive pressures, regulatory requirements and a conservative approach to deployment risk have influenced the multi-year implementation journeys. Good progress was made in 2015 and positive impacts have been achieved to date. The overall platform modernisation is in its final phase and all programmes are on track to be transitioned to a close in 2017.

Personal & Business Banking

In South Africa, SAP customer relationship management (CRM) was deployed as the foundation for a single view of the customer in 2014.

In 2015, customer records were migrated from the partner legacy platforms and were consolidated to SAP CRM finalising this phase of the core banking transformation. In 2016, an enhanced anti-money laundering solution was deployed on this foundation.

Over the past four years, Finacle core banking has been deployed locally in seven countries. In 2015, Swaziland was the first country to implement Finacle core banking in a centrally hosted private cloud. Subject to regulatory approval, this cloud enablement will be extended to the remaining operations in the rest of Africa in 2016 and 2017. Significant benefits have been derived from the core banking programme including improved customer experience across channels, faster response to market needs, operational efficiencies and flexibility, standardised technology and future cost savings due to shared cloud infrastructure.

Digital banking

This year proved to be a watershed year for Standard Bank’s digital capabilities. Our smartphone app was significantly enhanced to arguably become South Africa’s most feature-rich banking app. Some successes included:

  • Consolidating financial worlds: with just a few taps of the screen, customers can now access services from vehicle and asset finance, insurance, UCount rewards, home loans, share trading and web trader, credit card, offshore banking, and more.
  • Rapid innovation: included banking and trading on the Apple Watch, touch ID fingerprint login and the Balance Peek feature enabling balance checking without logging in.
  • Geographic expansion: work on our architecture platform enabled us to release digital banking services in Namibia, Nigeria and the Standard Bank Offshore Group. In 2016 the banking app will be deployed in Botswana, Ghana, Namibia and Uganda and customers in South Africa will be enabled to pay accounts anywhere in the world.
Table

Corporate & Investment Banking

In CIB, the emphasis to develop the capability to service our multi-national clients across the African continent has delivered good value. In 2015, we continued to modernise our platforms with the implementation of Business Online, International Trade and eMarkets platforms; these are already enabling an improved experience for our clients in our chosen jurisdictions.

Our investments are delivering substantial value by strengthening our ability to adapt to rapid change and to continuously improve customer service.

Expenditure

Table
1 Includes capital and operating expenditure.

The costs of platform modernisations and the transformation to the digital bank of the future are an investment in long-term competitive advantage, value creation and sustainability. We continue to focus on improving efficiencies in ‘run the bank’ costs and delivering more for less in ‘change the bank’ costs to bring IT expenditure within global benchmarks by 2017.

Our new IT platforms represent a significant capitalised software asset on the group’s balance sheet. This asset is amortised at rates appropriate to the expected useful life of the asset. The amortisation impact is expected to peak in 2018.

Forward focus

  • The long-term benefits of our modernisation and digital journeys will continue to strengthen our competitiveness, resilience and agility in support of the group strategy. As we enter a more fast-paced and in some cases a more complex era of IT, we are well positioned to partner with the group on its journey to be the leading financial services organisation in, for and across Africa, delivering exceptional client experiences and superior value.
  • Key objectives in 2016 and 2017 will be to conclude the platform modernisation programmes. We will also continue to leverage the benefits of this transformation, integrating our systems across the group to serve the full range of our business and customer needs to drive business value.
  • The foundation has been established to enable us to become a first-class digital enabler in Africa.

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