Many senior banking executives today still view IT as a superfluous cost. As such, a number of banks still use technology that date back decades, with minor upgrades and maintenance over the years. The IT systems that hold up our every financial move are a disaster waiting to happen.
A KPMG report warned last year that the next systemic shock to UK banking could come from an as yet unforeseen event, such as a massive payment outage or a cyber attack. Since the IT systems in most banks are complex and some essential parts of these systems are very old, a system outage is almost inevitable. The IT systems that hold up our every financial move are a disaster waiting to happen.
A Few Days To Disaster
In the summer of 2012, a routine software update in India caused an IT meltdown at the Royal Bank of Scotland. As a result, 17 million customers were locked out of their accounts for days. This was followed by a hardware failure in March 2013 that prevented millions of customers from accessing online services and ATMs for hours. While the bank is still under investigation by the Financial Conduct Authority over these incidents, it suffered a third embarrassing system outage on the busiest online shopping day before Christmas last year, followed by yet another IT failure a few days later
Catastrophic IT failures such as these can lead to financial chaos, create financial hardship for both businesses and families and, if not quickly addressed, may even lead to social breakdowns. If employers are unable to pay employees and people are unable to pay their rents, buy their groceries and medicine or pay for their transport, utilities and credit card bills, social unrest may ensue.
Due to the enormous number of transactions that take place every day in the financial sector, a major bank only has a matter of days to recover after suffering a catastrophic IT failure. If it fails, the backlog of financial transactions would simply become unmanageable, and the bank would be overwhelmed. This is of course an Armageddon scenario, but it is highly probable given that some of the core IT systems used by all UK banks were developed in the 1960s and 70s. We should be prepared for more problems like this to strike in the coming years. – economywatch.com