UK banks must update ageing IT systems to cope with customer demands for new banking services, according to a leading financial regulator.
Andrew Bailey, chief executive of the Prudential Regulatory Authority (PRA), said that the legacy IT infrastructure used by lenders struggles to deal with new customer requirements such as online and mobile banking, according to The Independent.
“The world has changed,” Bailey told the paper. “We all used to have to wait for whenever it was for our statement to arrive to know what was going on in our bank account. Now many people can interrogate their accounts online. That is good, that’s innovation, but it puts a lot of strain on these core systems because it’s a world they weren’t designed for.”
He added that the industry currently relies on “complex and quite aged IT” following numerous mergers and acquisitions, and suggested that banks should take the “bold” move of rebuilding systems from scratch rather than bolting onto existing software.
Bailey’s comments follow the launch of a formal assessment of the resilience of banks' IT last week, with the PRA conducting the review alongside the Financial Conduct Authority and the Bank of England. The aim is to assess how banks manage their exposure to IT risks, how engaged boards are with improving IT resilience, and whether they have the necessary expertise to challenge executives.
Some lenders have begun to invest in new infrastructure, with Nationwide switching to an SAP core banking platform last year. Others with more serious legacy IT concerns are also attempting to simplify IT estates, with Royal Bank of Scotland CEO Ross McEwan pledging to invest in upgrading IT after “decades” of underinvestment, while Barclays has also attempted to address its IT complexity through its ‘Transform’ agenda.
However, a senior member of the PRA, Sam Woods, warned in January that UK and Northern Ireland banks are a long way from making “antiquated” IT systems more robust, after a number of "deficiencies" were found as part of its investigations.
Commenting on Bailey's views, industry body techUK said that industry wide collaboration is needed to imrpove systems and prevent more outages.
"[Improvements to legacy systems] will not happen under the financial services industries own volition and demands a collaborative approach from all key stakeholders," the group said in its blog.
"techUK therefore believes that there is now a need for a 'Digital Modernisation Strategy', ideally led by the banks themselves with the support of policy makers/regulators, and the technology industry – which can provide a platform for the positive evolution of the industry."