Lloyds has been the latest victim in a litany of banking technology failures that has dogged the financial services industry. Customers were frozen out of their accounts for a few hours, unable to make ATM withdrawals or payments using their debit
cards, leaving many furious at what they perceive as gross incompetence. Lloyds blamed a problem with its servers.
This follows hot on the heels of an RBS failure before Christmas and a NatWest issue last summer.
So the question is raised – again – why does the UK banking industry have so many tech issues? With the resulting reputational damage, customer fury and shareholder dismay, you would think it was a priority for banks to sort out their tech houses.
But it isn’t quite as easy as it looks. We have spoken before about legacy systems and how they are affecting the UK banking sector. An industry article out this week puts the blame at outsourcing’s doorstep. A worker talks about how banks have become overly
reliant on offshoring in particular and how it is being used for operations that are too critical, such as production support.
They cite one of the main problems as being when legacy systems are looked after by offshore suppliers – they are often not conversant in whatever ancient developer language that’s running the ship.
As we argue, the offshore model has its place – for banks to strip back overheads, it is possible to use offshoring for certain types of work, such as support or development – but banks should be looking to reshore more business critical operations. Using
boots on the ground in the shape of a consultancy blend of experienced and young consultants could be an answer.
But the fact remains that the complexity of the UK banking infrastructure is at the heart of the issue. Collective acquisitive behaviour has led to a hotchpotch of systems that the banks run off. Added to this is the minefield of new technology – eager to
appease customer demand for mobile applications and other technologies, banks have simply had to plug these on to their ageing infrastructures.
It’s been a Band Aid job and banks are doing their best. But it can’t last – systems will continue to unravel and customers will continue to be inconvenienced. Just how long banks can carry on patching up remains to be seen.