When we deal with money how reliant are we on the digital world?
Save, borrow or pay when you deal with banks you will almost always be obliged to do so using digital means. It makes controlling your money a lot easier and of course makes the investment in bricks and mortar unnecessary.
On the face of it investing in systems is the way to go – that’s assuming they work.
Readers of this blog will note that I often refer to anecdotal experience. Whilst this can be unreliable I know that it is information in an uncorrupted format. It’s something I’ve been witness to and in many cases is corroborated by friends and acquaintances. This is preferable to the advertising that frequently glosses over the facts.
One thing that’s clear is that all is not well.
Last year obsolete IT infrastructure caused some banks outright failure in their payment systems. Let’s call this a plumbing failure. It was obvious and severe and led to fines. What is equally insidious is the “unequal application” of IT across the business. As this is not something banks are willing to openly discuss I rely on anecdote.
Many bank accounts are now operated by the customer across the web. In general this 24/7 process works. Compare this with opening and closing accounts which remains a relatively manual process that just hasn’t kept up with times and is fraught with delay, lost documents and late payments.
Statements too are accessed via the web. However cash and/or securities have disappeared as a result of manual errors or infrastructure upgrades. Something that’s not easy to spot unless you keep paper records. Is it possible that a bank could permanently lose customer records? These problems aren’t just retail.
Wholesale risk management and reporting varies in its depth, quality and accuracy to such a degree that it is likely that there are significant shortfalls. In other words it shows the direction of travel rather than the speed. More often than not the problem isn’t one of plumbing. It’s more to do with operational risk (behaviour and assumptions).
Whilst successful application of technology puts banks in a better competitive position it’s clearly something the incumbents struggle with. Not least because it’s complex and expensive problem that touches all parts of the business.
In a recent FT interview Sir David Walker explained that subsequent to his 2009 recommendations boards should now include individuals cognisant with the relevant technology. This seems to be eminently sensible.
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