The RBS story last week was the latest in a long line of banking tech failures. year. So why do they happen and is there a solution?
Many insiders believe there has been a gross under investment in banking technology in the last ten years. Well, banks have been busy ploughing resources into compliance to keep on the front foot with burgeoning regulatory requirements. And there's real
pressure to keep up with new technology adoption, especially with m-banking.
So have they have failed to invest in their basic infrastructure? Quite probably. Banks have a limited resource where it comes to technology investments. And in cantering to keep up with market developments, it’s little wonder plates have been dropped. Things
like offshoring have also complicated the picture making the banking landscape more prone to tech failures.
One of the main problems is they are almost all reliant on legacy systems. All the M&A and consolidation activity back in the 80s and 90s means that these complex and multi layered systems are underpinning our countries’ biggest banks.
The complexity of the environment means any IT change can cause myriad problems. And there's also a definite under investing in testing and quality assurance. An issue with testing, particularly the end-to-end testing needed to identify the wider impact
of change, is that banks only have a finite resource for it. You can’t test for every eventuality as the cost and time involved would be through the roof. You have to assess the risks and make an educated judgement. Of course, this approach means that problems
will inevitably occur.
A total replacement of legacy systems and decades old software would be ideal. But that would be massively expensive – the Tesco Bank news that it is to enter the current account market after spending years and a huge amount of money moving away from the
RBS infrastructure, building its own IT systems underlines this.
But they have to do something – customers will start to lose patience with their banks’ service failures if they continue, will vote with their feet and start switching accounts. Technical hiccups damage reputations and can have a serious impact on share
price. So investing in robust systems and architecture that is tested on a regular basis must be a top business priority.