March 20, 2023

Tech threat to banks causes overload and compliance issues

Mobile devices may be today’s must-have tool for personal productivity, but they are placing increasing pressure on banks’ online services and apps. These demands are further fuelled by the trend for ‘dual-screening’ – the act of working on two devices concurrently – which has left many banks with antiquated IT systems struggling to cope with modern-day customer needs.

With many banks operating on decades old IT systems, the rise in the number of system queries has resulted in a number of high profile crashes. In January, Lloyd’s Banking Group, which had already been fined £28 million by the FCA in December, experienced a three-hour outage. This followed a pre-Christmas system meltdown at RBS/NatWest and catastrophic Summer IT outage which left millions unable to access their accounts for weeks.

For these two state-backed banks and others, the rapid digitalisation of banking has seen many banks struggling to keep up. But while research suggests banks are starting to allocate capital to new technology and innovation, investment in maintaining existing systems is being under-resourced. 

Following the numerous financial institution ‘downtime’ debacles, the Financial Conduct Authority (FCA) asserted its position on Financial Information Technology in its ‘Risk Outlook in 2013.’ The publication warns about the threat to banks’ customer facing IT services because of their reliance on “ageing systems and merged technologies needed to process a growing volume of transactions and adapt to new demands.”

This warning puts banks on notice that the FCA is watching for system failures that will impact consumers. Therefore, it places increased pressure on banks to ensure continuity of service or face the consequences imposed by the FCA. For consultants faced with the unenviable task of improving a bank’s infrastructure, ill-fitting, outmoded systems are causing havoc. Some say that even accessing some archived or legacy data is challenging because of the obsolete formats used to secure the data originally. One consultant found himself tracking down and redeploying outmoded equipment just to access data stored on old-fashioned tapes; Something of a backward move. 

The risk of interruptions to banks’ IT services resulting from ill-fitting, outmoded systems threaten their ability to meet the Financial Services Banking Reform Act 2013. And with higher standards than ever being imposed on banks, the argument for utilizing a third party expert to minimize data storage and archival risks and ensure business continuity and FCA compliance has never been so strong.

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