The problems at RBS with its payment systems will have sent a tremor through many other banks. It exposes the extent to which their legacy systems and processes are often only an incorrect update or inexperienced operator away from collapse. Held together by the equivalent of string and tape, and understood by a dwindling number of staff, there but for luck could have gone plenty of others.
RBS is by no means the first and certainly will not be the last to suffer high-profile humiliation and such issues can happen with package software as well as in-house. Where the problems happen outside of retail, they are often hushed up by friendly nostro counterparties, but when your ATM network goes down, your retail payments go awry, or your customers’ credit card details are hacked, it is all too public.
At RBS, and its subsidiaries, with millions of customers unable to see incoming payments, the press has had a field day, highlighting the human cost of the problems and with the final financial and reputational cost to the bank still to be calculated.
The finger of blame at RBS is pointing towards an individual operator and a third-party company running the batch scheduling software. This will cause the long-standing outsource sceptics to nod sagely and mutter ‘told you so’ and will not help the cause of such suppliers. However, all large banks rely to some extent on third parties and management of these, with tight governance and processes, is part of the art of running today’s bank. It should never have been possible for one person or one piece of software to go wrong on such a scale.
Ten or 15 years ago, RBS used to make a lot of its in-house systems, touting itself as ahead of the game from a technology perspective. But those mainframe-based Cobol applications and the spaghetti around them are now hampering this bank as they are at most of its counterparts as well. You wouldn’t run a company in most other verticals on this sort of set-up and more and more people are aware that you shouldn’t be running a bank on it either.
Article (IBS comments on this week’s major IT problems at RBS ) edited and published by IBS Intelligence on 28 June 2012.