Santander’s systems irritate once more

The news yesterday that Santander has messed up the conversion of Alliance & Leicester’s core systems to their Partenon platform is really disappointing. It’s disappointing because the bank should by now be well versed in smooth migrations after many mergers and acquisitions, and it’s disappointing because they messed up just as badly when they tried to migrate Abbey’s core systems to Partenon three years ago.

So what’s the story?

Going back to 2002, Santander realised that they couldn’t become the global powerhouse they are today if their systems weren’t streamlined, so they embarked on the Partenon project to enable rapid growth.

What is Partenon?

Well, see the end of this blog entry for more detail, but it’s basically the brainchild of Banco Santander’s Chief Executive Alfredo Sáenz Abad. According to European CEO Magazine:

“When Sáenz arrived at Banesto, he ordered the computing system to be ‘rebuilt from scratch’. He oversaw the introduction of a new IT setup that was ahead of its time in the banking world: staff in one part of the business could easily access customer information from another division, meaning they could assess credit risks much more efficiently. Santander saw the value of the IT system when it began its acquisition of Banesto, and implemented it throughout the wider company. Today, the system still remains in place at Santander, albeit much evolved and known by its new name, Partenon.”

In other words, Partenon was the core platform of Banesto Bank, and Santander spent £170 million on IT consolidation back in the early 2000’s to get the group’s systems standardised on it.

The intent was simple: ensure that the bank had a single customer view through a single database, and reduce IT expense and overhead by maintaining just one global service.

In practice, since the group went on to acquire other banks, the execution has been far from simple, as it has affected customer loyalty badly.

So what went wrong?

Well, first a bit of history.

The merger of Banco Santander and Banco Central Hispano, following the merger of Banco Central and Banco Hispanoamericano, created Banco Santander Central Hispano, or BSCH in 1999.

Following this, the Group went on to fulfil global ambitions of growth through acquisitions:

• July 2004 Banco Santander Central Hispano announced the acquisition of Abbey National plc (full background if interested).
• June 2006, Banco Santander Central Hispano purchased almost 20% of Sovereign Bank and acquired the option to buy the bank for $40 per share for one year beginning in the middle of 2008.
• August 2007, Banco Santander Central Hispano changed its legal name to Banco Santander.
• October 2007, Grupo Santander acquired ABN AMRO's subsidiary in Brazil, Banco Real, and its subsidiary in Italy, Banca Antonveneta.
• November 2007, it sold Banca Antonveneta to Monte dei Paschi di Siena.
• March 2008, Banco Santander sold Interbanca, a subsidiary of Banca Antonveneta, to GE Commercial Finance, receiving in return GE Money businesses in Germany, Finland and Austria, and GE's Card and Auto Financing Businesses in the UK.
• September 2008, announced the acquisition of the savings business of UK bank Bradford & Bingley (B&B) with deposits of £22bn, 2.6m customers, 197 branches and 140 agencies.
• October 2008, Banco Santader completed the takeover of UK bank Alliance & Leicester, with £24bn in deposits and 254 branches.
• October 2008, Grupo Santander announced that it would acquire the 75.65% of Sovereign Bancorp it does not currently own for approximately US$1.9 billion (€1.4 billion): the acquisition of Sovereign has given Santander its first retail bank in the mainland United States.[12]
• December 2010, intention to complete the merger of Abbey, Alliance & Leicester and Bradford & Bingley operations in the UK.

OK, so there’s the background.

And what’s the problem?

The problem is that the core platform had been built for Spanish operations and the bank had huge issues when they tried to standardise everything onto Partenon in the UK.

I wrote about this in 2008, when it was obvious that the cutover to Partenon at Abbey was floundering:

“The various people I have spoken to at The Abbey say that a lot of problems have cropped up since they changed to a new computer system ... from what I glean from the people at Milton Keynes is that I am one of many, many, many people who have had their account details 'randomised' by the new system.”

The problems they encountered at Abbey were mainly around the different regulatory and reporting structures in the UK, and the fact that customer behaviours are different here. For example, most Spaniards use branches, whilst most Brits never go to a branch; most Spaniards stay with the bank whilst many Brits change accounts regularly; and so on. Therefore, there were big differences in communications and contact.

They also encountered issues over lay-offs. From the get-go, Santander were aggressive in removing headcount from Abbey, particularly in Marketing and IT, removing around 10,000 heads in the first year of takeover. That didn’t exactly encourage strong morale in customer-facing communications and IT handover.

In addition, it wasn’t exactly a simple project:

“The bank moved 10 million savings accounts, four million current accounts and eight million card accounts to the new platform from Abbey systems. The bank has renewed its branch communications network by building more than 45 portals for 26,000 employees and third-party organisations, and has also created a back-up datacentre.”

A year later, the conversion had been completed satisfactorily however, with the bank gaining £300 million per year in cost savings.

The result of these efforts meant that everyone thought it would stand the bank in good stead when moving the core systems of Alliance & Leicester and Bradford & Bingley.

Nope.

Yesterday, the news came out that there are BIG problems again, with the Guardian reporting that customers cannot access internet banking services after the migration began over the last weekend. Add on to this that, like Abbey, Alliance & Leicester customers aren’t receiving cards on time and have had their sort codes changed without notification, and you can soon see another bank sinking to the bottom of the customer satisfaction league tables.

Oops, they already are according to Martin Lewis:

“Santander tops the banking hall of shame as we reveal MoneySavingExpert.com users overwhelmingly rate it worst for customer service. A mammoth 62% of the 3,388 Santander customers who voted in our customer service poll, which attracted 17,675 respondents over the past week, rate its service as poor.”

You may say it’s small beans, they’ll get over it, and it’s just a glitch. Fair enough, but surely it’s a bit embarrassing for a bank that should know what they’re doing by now to mess up yet again.

For example, a bank that hasn’t done this very often – Lloyds – are engaged in the biggest migration ever seen – HBOS. Have you heard any bad news about their migration project yet? I doubt it ... mainly because it doesn’t really start properly until summer 2011.

Meanwhile, if you’re a customer of the 318 Royal Bank of Scotland branches sold to Santander for £1.65 billion last week, you may be nervous. In fact, you may think about changing bank:

“Royal Bank of Scotland (RBS) is sending two million of its retail and business customer’s letters confirming they are being "sold" to Santander. The letters state that RBS expects the £1.65bn sale to take up to 18 months and it would continue to service them during this time. But once completed, it said ‘your local branch and any of your accounts included in the sale will transfer to Santander’.”

 

A little more detail on Partenon

In an interview with Santander CIO José María Fuster, he outlines the Partenon strategy:

“At Santander, technology has always been considered a competitive weapon. Both our vision of becoming the world’s most efficient global bank and our persistent customer focus have been the most relevant drivers for undertaking such an ambitious project to implement the Partenon and Alhambra systems.

“Partenon is the core banking system that covers the whole company’s operating model, creating value through better control, quality and efficiency. Its architecture allows integrated, multi-channel customer management, short time-to-market and flexible product development, together with consistent management information. We include all our best practices in Partenon, so we transfer them every time we implement it in a new bank. Alhambra complements the Partenon core banking system with a flexible and easy to use front-end solution, focused on providing local banks with customised tools to increase commercial effectiveness, streamline customer services and improve the multi-channel end customers experience.

“All in all, with both solutions, we have in our hands a very solid architecture which is helping us to optimize our end-to-end processes, from both a commercial and a cost centric point of view. They also allow us to export our way of doing banking to all our new franchises. Partenon and Alhambra have proved that it is possible to increase revenues and improve customer service, while contributing to continuing cost reduction objectives.

“The Partenon and Alhambra projects are not only about technological development, they are also a transformation project. This has been the main challenge for us as we have been implementing a new architecture which had embedded a new business, organizational and operating model. In essence, it’s a new way of doing banking.”