RBS glitch demonstrates the UK’s creaking banking infrastructure
Today’s payment glitches at RBS, which are affecting thousands of customers across the UK, are another timely reminder that many of the City’s IT systems are a ticking time bomb.
This is not the first time the UK’s creaking legacy systems are in the spotlight.
Last October, RBS was fined £56m following an IT meltdown in 2012, which locked millions of customers out of their accounts. And just a month earlier, the Bank of England’s Chaps payment system collapsed for almost a day, leaving thousands of homebuyers unable to close deals.
Today’s failure needs to serve as a wakeup call for the City. Although we have seen a lot of payments innovation in recent years in terms of mobile payments apps or contactless cards (to name just two), one story remains largely untold: The rails along which most our payments – and along with them our data – are sent, weren’t built with the needs of the modern world in mind.
It’s time that banks start investing into new infrastructure, payment switching and authorisation platforms, clearing and settlement systems and payment operations. They need to understand that committing to any single payments technology could be to some degree risky, and that instead investing in infrastructure allows systems to remain responsive to future developments in the industry.
Of course, there are vested interests in keeping the old systems alive. Many of them are run like fiefdoms and those who govern the systems want to hold on to their reign as long as possible. Most risk departments and IT chiefs will not sign off investment into new payment infrastructure because it’s a time and cost-intensive process. Wrapping 40 or 50 different payment engines into one can seem like an overwhelming and complicated undertaking.
Many of the banks have been frightened by the size and risk of the task but solutions exist. Banks don’t need to remove all of their old systems in one go and replace them with new technology as there are ways to upgrade IT infrastructure in 'bite size' chunks.
Modern banks need effective and reliable IT systems. Only then will they be able to tackle the current challenges and effectively adopt new payments innovations – the only way to survive in the ever changing world of banking.