Royal Bank of Scotland's IT systems failure offers a stark reminder to lenders struggling to keep up in the internet age.
The Royal Bank of Scotland has experienced every banker’s nightmare – an information technology failure that disrupted payments for almost a week. The UK press was full of stories about customers’ bills not being paid, critical mortgage completions breaking down and even a story about one man who spent the weekend in prison because his bail payment was not received.
With bankers still regarded as public enemy number one following the crisis, the idea quickly developed that banks were spending millions on bonuses rather than fixing their IT and looking after their everyday customers. Bank of England governor Sir Mervyn King called for an investigation into what went wrong and why it took so long to recover.
The Banker will await the results of this inquiry with interest but even before they arrive, the RBS incident should serve as a wake-up call to banks everywhere. Many of them have legacy IT architecture that is struggling to keep up in the internet age. Consultants have described this predicament time and time again but always the temptation is to put off such major investments for another day.
Apart from the expense, the feared disruption of installing a state-of-the-art core banking system is usually sufficient to persuade bankers that patching up the current one is preferable.
In PR terms, RBS responded to the crisis well – offering to pay any costs and keeping branches open for longer hours to deal with the backlog. But the RBS lesson is to dust off those IT overhaul plans and get moving now. Expensive as IT investment is, having substandard systems may be the more costly option in the long run.
