One Response to “Why are banks so backward?”

1. Pouria says:

   December 1, 2009 at 2:55 pm

   Hi Jasmine

   I appreciate your frustration, as I am sure most other people including myself do also. Given the difference in service offerings between banks (just compare Barclay’s & Barclaycard’s new websites, including their PINsentry to offerings by some of the more backward banks), it seems clear some banks do not see this kind of investment as a priority. Taking a lead from some of the services available, it seems many banks could be providing a much better service given even the current services and technologies available.

   But regardless, I think it is important to highlight some of the background that underpins many of these issues before drawing up ill informed conclusions and debates. I myself have only a limited understanding of the industry, but even a quick review on some of the literature highlights a whole raft of issues that banks need to grapple with in providing IT servers. Many of the issues you mention are actually a result of the banking industry having been one of the earliest adopters of IT technology.

   Many services you mention run on secured legacy backbone systems that are notoriously difficult to update. These are common to all the banks and limit the level of service that can be provided. The risk and costs associated with modernising systems that run 24/7 can be huge and inhibiting. The consequences of any core element of the banking system failing, even for a few hours would be disastrous. This is compounded by the fact that any change would need to be agreed at an industry level and will generally have to prove to be absolutely secure before implementation, making the very newest technologies a risky choice.

   Ironically, this issue effects newly developed countries to a lesser degree. To take your example of Russia, due to its only very recent modernisation, its banking backbone infrastructure will be decades newer than those of Briton.

   And this is not only an issue that the banking industry grapples with. The airline industry has backbone booking systems that are so old, most airlines are afraid to touch them with a barge pole. These can only store 24hours worth of data, explaining the inability to provide some services you can even expect from your pizza delivery service.

   This is not to defend banks. Many seem happier to fund their shareholders than their IT systems. As you mention, where banks rely solely on their own infrastructure to provide services (to take you r example of instantaneous transfer WITHIN the bank), bank can and should make more effort in the services they provide, often lacking now. But to be a meaningful debate, there needs to be some effort to understand the core issues that relate the industry as a whole.

   Kind Regards,

   Pouria

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