Will legacy IT systems be the undoing of the banking sector?

Is a reliance on outdated IT concepts affecting confidence in the UK's banking sector? Rene Millman investigates...

The Royal Bank of Scotland (RBS) suffered a major failure in its IT systems last December that left three quarters of a million customers unable to use their credit and debit cards for three hours on one of the busiest shopping days of the year during the run up to Christmas.

The problems also ran into the following day for some, while others claimed funds had vanished from their accounts.

This wasn't the first time RBS suffered a failure at the hands of legacy systems. In June 2012, a corrupted software update for one of the payment processing systems running on its mainframe stopped customers from withdrawing cash from machines. It also caused customers to miss deadlines for paying bills, resulting in an investigation by the Financial Conduct Authority.

The banking disaster led RBS chief executive Ross McEwan to admit to "decades" of underinvestment in its IT systems. While the problems were eventually fixed, it has thrown a spotlight on banking IT and whether or not it is fit for purpose.

Advertisement
Advertisement - Article continues below
Advertisement - Article continues below

Up to the job

A spokeswoman for the group told IT Pro that the majority of that investment was "in response to new regulatory requirements and to maintain our complicated and inefficient infrastructure that still is a reflection of the past shape of the bank".

"Over the next 5 years we will maintain our IT spending. But now the majority of that investment will be directed at resilience, simplifying and modernising our infrastructure, resulting in real benefits to our customers, giving them new innovative capabilities such as mobile, as well as greatly simplifying and speeding up core processes such as account opening and mortgage applications," she says.

In light of this respond, IT Pro contacted the other major banks about their plans for modernising their IT estates and how they planned to avoid the same fate as RBS.

A Lloyds Banking Group spokesman went on record to say its focus was on customer service, risk mitigation and operational continuity and - to that end it - "became the first bank to have a Chief Digital Officer reporting directly to the Group CEO and represented at the Group Executive Committee."

Over the next 5 years we will maintain our IT spending. But now the majority of that investment will be directed at resilience, simplifying and modernising our infrastructure.

Advertisement - Article continues below

The spokesman says Lloyds spends excess of 2 billion on IT annually and over the past six years "we have invested 800 million across the Group to develop our digital assets to serve the changing needs of our consumers and commercial clients. In 2014 we plan to invest a further 275 million (vs. 225 million in 2013) in digital."

At the time of publication, IT Pro was still awaiting comment from the other major banks.

We also contacted The Financial Conduct Authority regarding RBS' IT failures. It wouldn't comment on individual banks' systems, other than to say it had started an investigation into the situation in June and July 2012 that would "reach its conclusions in due course and will decide whether or not enforcement action should follow that investigation."

Featured Resources

The essential guide to cloud-based backup and disaster recovery

Support business continuity by building a holistic emergency plan

Download now

Trends in modern data protection

A comprehensive view of the data protection landscape

Download now

How do vulnerabilities get into software?

90% of security incidents result from exploits against defects in software

Download now

Delivering the future of work - now

The CIO’s guide to building the unified digital workspace for today’s hybrid and multi-cloud strategies.

Download now
Advertisement

Most Popular

Visit/cloud/microsoft-azure/354230/microsoft-not-amazon-is-going-to-win-the-cloud-wars
Microsoft Azure

Microsoft, not Amazon, is going to win the cloud wars

30 Nov 2019
Visit/cloud/amazon-web-services-aws/354223/what-to-expect-from-aws-reinvent-2019
Amazon Web Services (AWS)

What to expect from AWS Re:Invent 2019

29 Nov 2019
Visit/business/business-strategy/354252/huawei-takes-the-us-trade-sanctions-into-its-own-hands
Business strategy

Huawei takes the US trade sanctions into its own hands

3 Dec 2019
Visit/hardware/354237/five-signs-that-its-time-to-retire-it-kit
Sponsored

Five signs that it’s time to retire IT kit

29 Nov 2019