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Western EuropeJuly 5 2010

Across the board

Increasing efficiency: Santander Group's chief information officer José María Fuster has overseen a major IT system restructuring programmeSantander's acquisition spree has left the bank with a major IT challenge. But as José María Fuster, its CIO, explains, the bank has embraced IT integration as an all-encompassing transformation programme. Writer Wendy Atkins
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Across the board

While the budgetary constraints wrought by the global economic slump have forced many banks to seek more dynamic ways of consuming and paying for IT, there are a number of institutions for whom major IT spend is simply not a matter of choice: Nomura, Barclays Capital, Lloyds Banking Group, Wells Fargo and of course Santander, to name but the most obvious few. Bloated by major emergency acquisitions, these institutions have spent the past 18 months attempting to digest and rationalise their new, expansive and highly complex IT estates.

Spanish banking giant Santander Group is among the most notable of these organisations, having made a whole raft of major acquisitions in the past decade, including the takeover of Abbey in 2004. Through the consortium-led takeover of ABN Amro, Santander went on, in 2008, to acquire Banco Real in Brazil, doubling its presence in the country. In the same year, the Spanish giant increased its presence in the UK by swallowing up Alliance & Leicester and the troubled Bradford & Bingley branch network, to become the country's third largest bank by deposits. Not content with its European and Latin American expansion, in 2009 the bank established a firm foothold in the US retail banking market with the full-scale acquisition of Sovereign Bancorp.

Uncompromising strategy

Today, Santander is the fourth largest bank in the world by profits. But Santander's success, and indeed its capacity to reap the economies of scale promised by its rapid expansion, has been heavily reliant on successfully tackling the major IT challenges associated with its acquisitions. Fortunately for the bank's investors, Santander has a well-established appetite for major IT projects, and has often proved uncompromising in its strategy. Indeed, integrating the newly acquired banks into the group's core platforms stands at the heart of its IT infrastructure transformation project. "The main goal of our technology project was to enable Santander to become one of the most efficient banks in the world," says José María Fuster, chief information officer (CIO) at Santander Group.

To this end, the bank's IT strategy has focused on three key areas: improving its cost-to-income ratio by growing revenues and keeping costs under control, improving the quality of customer service, and controlling risks. Santander's core systems, Partenon and the Alhambra multi-channel layer, have underpinned this strategy, and have already allowed the bank to become one of the most cost-efficient in the developed world.

"In 2009, our group-wide cost-to-income ratio was 41.7%, and significantly better than our peers' average, which stands at about 60%," says Mr Fuster. "Bear in mind that at the same time we were carrying out large integrations of the banks we acquired in the past couple of years. Technology has become one of our main pillars and a key lever for our present and future competitiveness."

When Santander devised its IT strategy, the bank had to take into account that there was no standard solution for a bank with the variety of retail business that it holds. Furthermore, the bank regarded a customer-centric system to be essential. "We decided to develop our own software under very strict architecture criteria that enabled us to export it to the group's various units," says Mr Fuster. "This has given us a clear competitive advantage in terms of lower development costs and delivering clear value in terms of intellectual property. Moreover, our in-depth knowledge of the software has helped us to implement it in the banks we have integrated into the group."

Standardisation has proved critical. Partenon now stands as the bank's core platform and its equivalent in Latin America, Altair, as well as the Alhambra multi-channel layer, have been implemented throughout the whole Santander Group with multiple transformation projects in recently acquired banks. As a result of the transformation, the bank has been able to develop a customer-centric business model, its CIO explains. "These enable Santander to offer unique products and services which are very difficult for our competitors to match."

Customer benefits

One striking example of this came in November last year, when the Spanish bank launched its zero current account, which charges the customer no fees for dipping into their overdraft - a chief mechanism by which UK banks have historically cross-subsidised their retail banking business. "We can pass our efficiency savings on to customers in the form of better offers," says Mr Fuster. "Partenon and Alhambra have proved that it is possible to increase profits and improve customer service while at the same time achieving our cost-reduction goals."

The transformation project has also allowed the bank to look forward to the ever-growing needs of the tech-savvy Y Generation "We have to be prepared for the explosion in demand for internet and phone banking channels that extending banking facilities to this new generation of digital natives will spark," says Mr Fuster. "This will be a huge challenge as we will have to adapt to the uses, sometimes surprising, that this new generation will make of technology. Santander Group's core technology enables us to identify the needs of this specific group of customers and adapt our channels to the new reality fast."

Mr Fuster believes that major IT projects cannot concentrate purely on technology alone, but instead have to be all-encompassing transformation programmes. "This has been our main challenge: to implement a new architecture that entails a new business model and a new operational and organisational model. In short, a new way of doing banking," he says.

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