Organisational change and the computerisation of British and Spanish savings banks, 1965-2005 J. Carles Maixé-Altés and Bernardo Bátiz-Lazo

Universidad de A Coruña - Spain Bristol Business School - UK

EBHA 2006

WORK IN PROGRESS. DO NOT QUOTE Material for ‘BANCA’ students - Master in Banking & Finance University of A Coruña Spain Prof. Dr. J. Carles Maixé-Altés

Summary

• Our aim – To present findings to date (this is very much research in progress!) – Explore the potential attractiveness of mechanization (including the use of computers) within the move from a retail branch-based organizations to M form.

• Research to date involves – Organisational changes associated with the automation of financial intermediaries in Spain and the UK. – A international comparison in two distinct competitive environments of a successful and an unsuccessful group of savings banks.

– Archival research on the evolution of savings banks helps to ascertain how participants in bank markets developed capabilities to compete.

Early computing at the Trustee Savings Banks

• Computers TSB: manual operations until 1967 then 23 English TSB - use bureau service offered by Post Office (four ICL 4 equipped centres) • 4 largest Scottish TSB - 33joint purchase of Burroughs equipment • TSB Computer Services is established in 1972 (brings in house former bureau service) • By 1982 the TSB has the most advanced database of client information in the UK • But in spite of high level of computerization, the share of the retail banking remained low

III. Spanish Confederation of Savings Banks (CECA) and tecnological change

• Competitive collaboration transformed shared experiences, and in turn, the creation of critical mass to effectively contest bank markets • The corner stone of technological change and market contestability in Spanish savings banks was CECA’s Organization, Automation and Service commission

(COAS)

ATM networks in Spain (1984-90)

• The idea of a computer link was one of COAS’ strategic principles since the early 1970s. • An example of the implementation of this principle was facilitating scale to individual savings banks by creating networks of payment systems around CECA. • Notable examples include ATMs and EFTPOS from 1980 onwards.

Network 1984 1985 6000 (Savings Banks) 1 315 1 755 4B (Banks) 708 795 Servired (Banks) Total 2 023 357 2 907

Source

: CECA and Tirado and Nieto (1991), pp. 121-22 .

1986 1987 3 050 3 954 1 030 495 4 575 1 421 563 5 938 1988 5 605 1 681 1 265 8 551 1990 9 432 3 000 2 000 14 432

Savings Banks ATMs in Spain (1986-2000)

1982 1983 1984 1986 1988 1990 1992 1994 1996 1998 2000 Number of machines 200 800 1 315 3 050 5 605 9 432 12 271 14 149 16 548 21 497 24 836 Number of withdraw

(millions)

Value of withdraw

( € millions)

77 144 240 284 362 328 383 922 4 508 9 165 16 516 20 939 28 067 25 261 29 125 57 383

Debit and Credit Cards in Spain (1989-2004)

1990 1995 2000 2001 Debit Cards Number (millions) Value of sales ( € millions) Credit cards Number (millions) Value of sales ( € millions) 18.3

22 376 39 182 74 740 77 461 7.0

6 425 22.3

8.3

13 075 31.2

14.3

27 568 32.0

17.6

34 598 2002 32.3

87164 20.9

40623 2003 32.3

94 033 23.8

48 733 2004 27.5

82 791 33.7

75 397

Achieving Scale through Co-operation in Spanish Savings Banks, 2005

CECA/Services

Markets (47)

SAVINGS BANKS COOPERATION COAS

(47)

JOINT ENTERPRISES

LICO (45)

COMPUTER COOPERATION

INFOCAJA (5) Discount(37+4) ( 37+4) Securities(34+12) Current projects: 39 Working Groups 27 Committees AC (42) CASER (38) ATCA (4) INFODESA (4) Cards (29+6) Professional envolved (>400 directives) TINSA (36) SERVIMATICA (2) Foreing (38) EURO 6000 (35) RiskManagement(46 ) New Channels (34+4) SAP (10) NORBOLSA ACAVALORES (11)

Note: Number of Savings Banks in brackets

Adoption of IT applications in Spanish savings banks (1968-2005)

Period Emergence (1968-79)

Technology and Operacional Functions

● SICA (Savings banks electronic clearing): previous development using first National Phone Company data transmission network (1968). ● BankAmericard (1971), by Banco de Bilbao ● Cheque guarantee cards (1973-88): first project of ‘Tarjeta 6000’ (savings banks card) ● Primeros proyectos para la domiciliación de recibos (1973-9) ● Mecanización de las nóminas de los empleados de las cajas (1974-6) ● Domiciliación de la nóminas de clientes de las cajas (desde 1979) ● Visa España (1979). First payment network: 56 banks, savings banks and cooperative banks) ● 4B System (1979). Second payment network: Banesto, Banco Central, Banco Hispano Americano and Banco Santander). Member of International Visa ● Euro 6000. Third payment network: 35 savings banks, centralized by CECA ● Auto 6000 (1979): fuel cheque

Period Technology and Operacional Functions Difusión (1980-95) ● SWIFT: international access (1980/1988) ● CCI (1980-4) and CTB (1984- ) Bank and Savings banks organization for clearing operations and operative services ● Debit card ‘tarjeta 6000’ (1981) ● ATM - off line: 1981-89, 47 savings banks ● Savings banks European project (1984-88): ATM service (CECA, IPACRI (Italy) and TSB (UK). EUFISERV (1990): a international company for ATM development. CECA adapted their ‘tarjeta 6000’ and connected with VISA and PLUS networks ● RJE, IFI and TAF (1985-87): desarrollo previo a la union de ordenadores de la CECA y cajas de ahorro usando bandas magnéticas y transmisión por lotes. ● Credit card (1985), ‘tarjeta 6000’ ( Savings banks-CECA) and Servired (1985): Visa system ● Central de Recibos de la CECA (1986): normaliza el sistema de domiciliación de pagos ● EFTPOS (1986). Las primeras propuestas se habían dado en 1981 ● ATM – on line: 1987, CECA and savings banks ● SITO –Sistema de Intercambio y Tratamiento de Operaciones (1988): union de ordenadores on line entre todas las cajas (el proyecto se había iniciado en 1974-78) ● Savings banks 6000 Network agreement with 4B Network (1989) and Servired (1994) ● First generation of smart cards: TIBC (banks and savings banks) ● EDI Electronic data interchange for savings banks (1995). First study in 1982 (videotext, cash management, EDI) ● Home Banking (1995) utilizando la via telefónica

Period Technology and Operacional Functions Communication and network architecture (1996-2005) ● Seguridad lógica ● Canal financiero en Internet ● Canal banca telefónica ● Adaptación al Euro ● Reporting financiero: aplicación NIC ● E-Procurement ● E-ESCA: formación en internet ● Arquitecturas alternativas al mainframe de IBM ● SEPA sistema de pagos europeo ● The Joint Forum – Basilea II ● Version WEB del SBP ● WOSA-XFS-JXFS:normalización de dispositivos de autoservicio

Cajeros automáticos en España y Reino Unido (1984-2005)

Reino Unido 1984 1985 1986 1987 1988 1990 1995 2000 2005

6 815 8 845 10 330 12 392 13 980 17 344 20 933 33 000 46,461*

España Red 6000 (Cajas de ahorro) Sistema 4B (Bancos) ServiRed (Bancos)

1 315 1 755 3 050 708 795 357 1 030 495 3 954 5 605 9 432 15 292 24 836 34 663 1 421 1 681 3 000 563 1 265 2 000 9 677 18 643 19 597

Total

2 023 2 907 4 575 5 938 8 551 14 432 24 969 43 479

Fuentes

: CECA, AEB, Bátiz-Lazo y Maixé-Altés (2006) y Bátiz-Lazo (2007) (*= 2003)

54 260

Conclusion

 Competitive collaboration can enable the creation of inter organisational processes and procedures to distribute otherwise inaccessible information.

 How similar/different was the process of transformation from retail branch-based system to an M-form organization in UK and Spanish savings banks?

– What was the role of CECA and the TSB regional boards? – To what extent did computer technology facilitate migration?

– What was the role of financial (i.e. accounting) information to determine performance?