RBC treads the integration path in its client-first strategy

The separation of operations and supporting technologies across business lines was not helping the customer experience. “The customer does not look at the service that the insurance area is providing or the service the bank is providing – they see the value of the service that RBC provides them as a whole,” he explains.

This led to the decision to take a holistic view of the client relationship and, in turn, that required the integration of some of the bank’s systems and services.

The requirements of regulation are often a motivator when looking at simplifying internal systems. Although there is no question that the Sarbanes Oxley Act, the Patriot Act, the Basel Accord and anti-money laundering regulations are putting pressure on the business, Mr Lippert is unusually supportive of them. “While this is not something that we want to build Cadillacs around, there are very good reasons for these regulations to be put in place,” he says.

Proving its strength

Mr Lippert believes that, in the long term, the regulatory test will prove the strength of the industry in terms of its anti-money laundering and capital measuring capabilities. What he does not appreciate is the view that regulations are themselves problematic; at RBC changes to the back office are used to achieve real benefits.

“We get great payback on architecture – complexity is what often contributes to downtime. When we reduce that, we improve the customer experience,” he says.

The bank has a central group that looks at both business and technical architecture, ensuring a consistency that aligns technology spend with top-line growth. IT is represented on the decision-making groups as part of the business at various levels.

At the most senior level, the group executive committee, the seven people involved discuss many strategic investments, including technology. “The seven of us have a lot of dialogue about strategic investments. I have people from my own area who are involved in the various operations groups in the companies so that we on the operations and planning group incorporate all of the decisions and planning into our decisions,” says Mr Lippert.

Different models

Looking at the driving forces behind this, Mr Lippert believes that many of the models that banks use on both the retail side and wholesale side are failing to provide differentiation for customers. Across geographies, the desire to provide improved customer service is seen as the leveller here.

The bank carries out the same analysis of customer data through use of single data warehouses that many other banks do, and it is able to deliver this to create sales. “Our people in the field have a single view of the customer so that they can best serve them,” he says.

For Mr Lippert, that is not enough, however. Neither is it enough to onlylook at routes other banks have taken. He believes that to compare the opportunities available to these banks is difficult. The factors of scale and even exchange rates are major inhibitors on the viable options that a financial services house has.

Taking a UK bank as an example, he notes: “They have the pound sterling, so when they move offshore they reduce their costs by 40%. So, for example, having 80 Canadian cents to the pound puts their cost reduction at 20% greater than a Canadian bank could achieve. We don’t see the advantage that a bank in downtown Manhattan or London would see.”

The great unknown

Mr Lippert is also wary of the long-term benefits of outsourcing core competencies to an offshore area because the future economic shifts are unknown. The Celtic Tiger (Ireland) is one example that he highlights.

“The low cost of Indian-based resources will change. There was a trend to outsource to Ireland a few years ago but as the economy grew, labour costs increased and the proposition became less attractive. The economics in India have already changed from what they were five years ago,” he says.

That is not to say that outsourcing is not an option, but that the reasoning for it is different. For RBC the option to outsource is decided on the strength of the skills that can be offered to the bank. Where a large amount of expertise in a new field is needed, the proposition becomes viable.

When sourcing the resources for development, there are clear areas where Mr Lippert sees a reason for using third party vendors. Commenting on the areas covered by SAP and Peoplesoft – now Oracle – such as human resources systems and enterprise resource planning systems, he says: “I don’t see any banks building those systems. That’s a good position in the market.”

Other examples, such as the analytics engine behind a CRM engine or developments around securities systems and custody, are all areas of intellectual property that the bank would seek to own. “You have to make sure you have the internal capabilities to make the business work.”

Cost savings

RBC decided to look for cost savings internally – and the model is already yielding advantages. For example, the bank has a broker dealer in New York and one in Minneapolis, along with one on the wholesale side and the retail side in Canada.

The bank is collapsing the back end systems and moving the business on to a single platform. The cost savings created are then reinvested into the business. The online RBC presence has also benefited from the integration of the US and the Canadian online banking offerings.

There is no lack of innovation. Where a technology adoption is a necessity – perhaps because of regulation – the bank seeks to maximise its return on investment. One example of this is the way it has added value to the EMV chip adoption. In partnership with Starbucks, the bank has launched the Starbucks Duetto Visa Card with which customers gain Duetto Dollars when they use their Visa card. The Duetto Dollars can be used at Starbucks to purchase coffee and merchandise.

Although the loyalty model has been used before and failed to take off, Mr Lippert notes that success has been achieved in this case by learning and adapting to fit the customer’s needs. “It’s a good example of taking an innovative approach to a model that has been around the block a few times and applying some thought leadership to it.”

Execution is the driving factor for Mr Lippert. “We believe that the investments we have made make the customer experience better. The investments that we have made are an enablement of the strategies.”