Are MP’s demands the solution to UK’s banking IT problems? (Part One)

For some time now the European banking sector has been in the firing line.

The most headlines over the past year have been driven by the system outages that some of the UK’s leading banks, such as Natwest, RBS and Barclays have been experiencing. Already in 2016, HSBC experienced an outage lasting nearly 2 days and effecting its online banking system, preventing its 17 million personal banking customers from accessing their bank account and functions online.

Following the latest glitch from HSBC, leading MPs held a Treasury Select Committee meeting to discuss the need for a major audit that could result in millions of pounds of restructuring costs for Britain’s biggest banks. The industry has been plagued by repeated IT failures which seriously disrupt and undermine the credibility of business and personal banks. MPs are looking to HSBC’s management for answers as to why in the past six months, they have experienced so many glitches in their core IT systems. Regulators should urgently audit major UK banks’ systems to ensure they are fit for purpose, and then require those falling short to invest more heavily in IT. Much like the financial stress tests undertaken in recent years.

The root cause of the problem

The frequency of these failures across the banking sector suggests a systemic weakness in IT systems. With a primary factor being the fact their core systems are based on legacy IT, with some banks running core banking applications on systems that are more than 30 years old. The technology currently in place isn’t going to get any younger, so the situation will only get worse if nothing is done to fix the problem.

Some of the UK’s leading and oldest banks are delivering more and more services to customers, whose expectations of reality have been set by consumer tech. The addition of new payment platforms like contactless and Apple Pay and digital interactions via online and mobile banking is imposing unprecedented volumes on these legacy banking systems. For example, in the ‘old days’ he peak CPU utilisation for bank’s servers was when batch processes were run in the middle of the night during a 4 hour window but in the digital world similar processing peaks are seen during lunch hours in a weekday or even at 10pm at night!

The string of recent glitches in the UK banking sector, highlights the structural flaws in their business-critical systems, and the level of risk they expose the businesses to. This is now a boardroom issue that the UK financial services regulator has to address since the problem is only getting worse.

A bank’s IT builds up over many years; its software is created by a myriad of different teams and outsourcing vendors, writing in different programming languages on different machines in multiple locations. The systems then become the product of hasty and ill-considered mergers. Problems are inevitable, fixing them can take years and cost a fortune.