Payment walls are crumbling - is it time for Payments EBRD?

Twenty-five years ago, the fall of the Berlin Wall saw the creation of the European Bank for Reconstruction and Development. Its mission was to find capital to help re-build national infrastructures mainly in the former Eastern Bloc countries. It invested in long-term projects that are tricky to finance, recognising that “well-planned infrastructure investment can lead to any number of beneficial outcomes for both communities and businesses”.

This week we saw yet more evidence of the walls crumbling around antiquated payment systems. The Royal Bank of Scotland's fine of £56 million following the IT problems in 2012 that locked customers out of their accounts may be largely symbolic. But the response from RBS senior management, acknowledging “decades of under-investment” is significant.

RBS is not alone in accepting the need to renovate ageing and creaking computer systems. But translating this intent into action across the industry is a vexing issue.

The economies of Central and Eastern Europe have undergone major transformation since 1989. And although it’s not all thanks to EBRD, they helped to tackle difficult infrastructure investments head-on. Keeping a perspective on key objectives and long-term benefits should be an inspiration for the payments industry. So perhaps we need a “Payments EBRD”.

Just as EBRD solved tricky funding problems, P-EBRD could help the most needy and suitable candidates to accelerate their payments renovation projects. Perhaps P-EBRD could even partner with regulators like the FCA to use fines to generate a pool of project finance. This fund, combined with specialist expertise, could be made available to the organisations most in need of this sort of assistance. Banks like RBS, for example.

OK. Creating P-EBRD may be too fanciful but could regulators be more creative? How about imposing a choice of penalties in case of future IT disasters? Regulators could for example present banks with a choice: Either pay a punitive fine straight away or keep the money – on condition that you can demonstrate real action on technology refresh.

Many in the payments technology community have warned for years that the IT systems of some of Europe’s biggest financial institutions are not up to scratch.  Fanciful solutions or otherwise – it is time for reconstruction and development.