Source: BBC

You put your card in the cash machine but nothing comes out. The bank’s IT systems have crashed again.

But you need money fast, so what do you do?

It’s an unsettling scenario that is likely to become more common over the next few years as the big banks try to upgrade their IT systems, experts are warning.

Global banking giant HSBC is just one of several major banks that have had intermittent problems with their technology, leaving customers unable to access online bank accounts and other services. Bank of America, Commonwealth Bank of Australia, ANZ Bank, Royal Bank of Scotland and NatWest have all suffered similar issues.

And these system failures – or outages in the jargon – undermine confidence in traditional banking and encourage more competition from nimbler start-ups.

For the next five years – and we’re talking globally – every incumbent banking player who’s been around for a while will have an increased risk of outages,” says Julian Skan, managing director of financial services at consultancy Accenture.

Legacy issue

The problem is that the old mainframe computers – the workhorses of the global banking industry – have been chugging away keeping tabs on all our transactions for decades now. They’re slow and reliable.

But the world has changed.

We’ve gone mobile and online. We expect real-time transactions and access to financial services around the clock.

Image copyrightAtom Bank

The new computer systems and programming languages designed to cope with this fundamental shift in our behaviour don’t interact well with the old, slower back-office systems.

Layers and layers of IT have built up over the years, gradually hobbling banks’ ability to innovate and respond to this new world.

“Very often banking groups that have grown by acquisition have never fully integrated their systems,” says Mr Skan.

“When a bank reaches a certain size it becomes too risky to change the core technology, so you build layers on top, and that adds complexity.”

‘The plane would crash’

There can be hundreds of applications needing management just on the retail side of banking, says Sameet Gupte, global head of banking and finance for tech consultancy Virtusa, which names nine of the top 10 biggest banks as clients.

“Now expand that globally and include all the applications serving the investment banking side and the number of applications can run into the thousands,” he says.

Mr Gupte likens the IT challenge big banks face to refitting an aeroplane while it’s in the air.

Image copyrightGetty Images

“If you tried to change the crew, the engine, the navigation system, the wings, and everything else, all at once while in the sky, the plane would crash,” he tells the BBC.

“This is the same with banking systems: if you try and change everything all at once then you will end up having to run two banks at once, in case anything went wrong, doubling your cost and increasing your risk.”

This is why banks take a cautious approach to upgrades, changing things gradually, he says. But this takes time and leaves the field open to nimbler rivals.

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