After a merger, Lloyds looks to ramp up its transaction banking services.
As is often the case, two can accomplish something that one cannot. Such has been the case with Lloyds Bank, which by itself was unable to invest in transaction services the way it wanted. But with its 2008 purchase of Halifax Bank of Scotland that objective is now possible.
According to Richard Dallas, a Lloyds Bank senior executive in the transaction services area, both banks had ambitions to improve their transaction services offering but had tabled those ambitions until the two companies merged. Now that the merger is done, the bank is on a four- to five-year timeline to dramatically invest in and improve its product suite with the goal of better serving the UK market.
To achieve its goals the bank is adding both financial capital and intellectual capital to the transaction services business, making heavy investments in product development, systems infrastructure and people development. One surprise has been the difficulty in acquiring experienced transaction people. In spite of the economic challenges and many announcements of layoffs, it is not these people that are losing their jobs since transaction services have been the bread and butter business keeping many banks afloat.
To be sure, Mr. Dallas said, it has not been Lloyds’ intent to become a global behemoth like other banks in the region. Its goals lean more toward quality; to be an excellent provider in the UK for its UK clients and non-UK companies doing business there. The fact that Lloyds isn’t pursuing the global bank status actually creates opportunities for them. “This strategy opens doors with large banks like JP Morgan and Bank of America [to partner with] because Lloyds isn’t a direct competitor like an HSBC might be,” Mr. Dallas said. So for now the goal is for Lloyds “to be who you think of when banking in the UK,” Mr. Dallas said.
That goal aside, the bank will not be without solutions outside the UK. Through partnership arrangements with the banks mentioned above and other banks, Lloyds intends to support its clients abroad in the areas of trade, cash management, payments and cards. The partnership approach will mitigate the need for heavy investment beyond the UK. With this in mind, the bank’s mantra is, “National strength and worldwide reach.” The notion of national strength is interesting given that the bank is 41 percent owned by the government as a result of the financial crisis. Yet, according to Mr. Dallas, “the bank maintains a reputation of trust even through the recent market issues.”
As Lloyds builds out it product offering it is pursuing a “best of breed” approach for partner banks and non-banks for any white label product offerings. The focus at hand is part of the overall strategy being driven by the banks new CEO, Antonio Horta-Osorio, who took the helm March 1, 2011, after several years heading Santander’s UK operation. “He is reinvigorating how the bank chooses to invest capital,” Mr. Dallas said. As such, the bank is selective in its development of where companies need the most services. The bank is conducting a great deal of market research, including numerous client panels in order to determine the needs of the market.