I attended a great conference in Copenhagen this week – Finans IT-Dagen.
Didn’t understand much of it, as the majority of presentations were delivered in the Danish language which is understandable being a Danish conference, but I did get the gist of the content from the slideware, much of which was in English.
A presentation that particularly intrigued me came from the CIO of Danske Bank, Peter Schleidt.
The reason it intrigued me is that, like the Icelandics, Peter’s bank is rapidly becoming a purely digital bank.
Here’s a few things his slides said:
- All products and services are online;
- Customers have digital id and digital signatures;
- All correspondence is electronic;
- Today Denmark is paperless: you can become a customer of the bank without signing anything physically, you just use digital signing; and
- Norway is now going virtual: you can become a customer of the bank without having ever having to go to a branch, just use Digital-ID.
As a result, the banks metrics are changing rapidly. Since 2009:
- Teller transactions are down 32%
- More than one in ten branches (11%) have closed (three in ten in Iceland and about to rise to six out of ten);
- Calls to the contact centre have fallen by 14%;
- eBanking users are up 27%;
- 4% of all transactions are now on mobile telephones increasing to 11% of all online transactions are made by mobile; and
- 320,000 downloads of Danske Bank’s smartphone apps so far (launched just under a year ago), generating 150,000 payments per month by mobile.
Then Peter presented a load of the bank’s stats in terms of IT and transaction processing as follows:
- Danske handles 10 million transactions per day and 3.2 billion payment transactions per year;
- 160 billion Danish Krona (circa $30 billion) in FX is traded per day;
- 15 million accounts are registered with their online bank;
- The IT budget is 4.1 billion Danish Krona (about $800m) per year; and
- There are 2,200 developers in the bank.
This last point intrigued me as, back in 2007, HSBC presented some of their stats as follows:
- HSBC process 100 million transactions and $1 trillion of funds daily;
- HSBC has over 125 million customers around the world;
- 25 million customers are online with HSBC's internet banking;
- HSBC’s IT spend is around 7.5% of revenues and 16% of operational expenses, representing over $4 billion per year; and
- They have more than 312,000 staff in 82 countries and 23,000 are technology staff with over half of these, 13,000, as developers.
Danske Bank employs 21,000 people in 15 countries, of which 2,200 are developers. That's over 10% of the workforce and, in HSBC's case, around 7% in development.
This makes these banks software development powerhouses.
By way of example, Microsoft employed 1,000 developers to produce Windows 7, and a mid-size regional bank is employing more than double this number whilst a major global bank is employing over ten times this amount.
Just to put further context, Danske Bank had revenues of DKK 46.28 billion (US$9 billion) in 2010) and profits of DKK 3.661 billion ($700 million), whilst HSBC has revenues of $68.2 billion with $13.2 billion profits.
Peter then went on to compare his operations with some of the other leading banks, and pointed out an interesting delineation of technology approaches.
- Danske’s approach, like Santander’s, is to have one systems platform everywhere. No differences by country or operation – all use the same system;
- HSBC’s is similar, but instead they build once and then deploy everywhere. In other words, it’s not one common platform but replica systems globally with local control;
- Nordea selectively standardise, so some systems are common and some are not; whilst
- Société Générale act as a ‘managed federation’ of systems, with many local differences.
Obviously the tightly coupled single platform is easier to maintain and control, Peter proposes, than the other approaches.
Yes, but what he didn’t discuss is why these banks need these megaoperations in the first place when so many standardised software, including core systems, can be bought off the shelf these days.
His only comment here is that banking is a digital business and so Danske Bank must develop the best in order to compete with other banks. This means the best banking platform for customers’ products, processes, services …
Not sure I agree, especially as so many banks are now taking the route of movements towards industry solutions rather than in-house.