News & Views - Savantor

The legacy of legacy systems

Monday, 16 December 2013

At the beginning of December the RBS Group suffered a systems outage impacting thousands of their customers, who were unable to make online and POS card payments or withdraw cash from ATM’s. This unfortunately happened on the day dubbed ‘Cyber Monday’, one of the busiest internet shopping days of the year.

The Chief Executive of RBS admitted that the Bank had suffered from ‘decades of underinvestment in its computer systems that have led to embarrassing IT failures barring customers from accessing their accounts’.

This was not the first time that the Bank has been in the public spotlight for major system problems: in June 2012 it suffered what was termed by the media as an “IT meltdown” when the systems of RBS, NatWest, and Ulster Bank suffered major problems resulting in significant customer impact.  And earlier this year RBS, NatWest and Ulster Bank customers were left unable to withdraw cash from ATMs, make card payments or access Internet and phone banking for several hours.

On the face of it, it might seem that the RBS systems are more prone to error than the systems of the other major banks.  There are however various incidences of system issues affecting customers of other banks over the past couple of years, albeit with less widespread impact.  As Richard Lloyd, executive director of consumer group Which?, commented recently, "There is a problem across the banking industry as to whether IT systems are fit for purpose." 

Intellect, an organisation representing the UK technology industry, recently released figures showing that at present 96% of total bank IT budgets are being spent on regulatory changes and upgrades. Traditional banks are relying on age-old IT infrastructure that was developed in an era far removed from the banking landscape of today. This is exacerbated by ever-changing regulatory demands, which puts further pressure on their legacy systems to comply with ever-more stringent requirements. To overcome changing IT and business demands, banks often make isolated updates to systems as and when required, however with the underlying issue of old-fashioned core banking systems, this simply complicates the overall systems further. Major platform change cannot be undertaken lightly and requires specialist expertise to ensure a successful and smooth transition.

The question therefore seems to be not whether RBS Group systems and processes are particularly prone to error, but rather whether it is fortuitous that other major financial organisations relying heavily on legacy systems have not experienced problems of such magnitude?  And furthermore, how long before another incident of this type will be experienced by the banking sector?

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