Banking Review

The downside of downtime

OPINION

Bank technology has been in the headlines of late for all the wrong reasons. Online banking downtime is becoming a more frequent occurrence, or at least an occurrence that gets noticed more often, as more customers shift online and banks struggle to service them consistently with decades old legacy systems.

Speaking after the bank’s half-year results this month, NAB chief Cameron Clyne admitted outages are a function of “big old legacy systems” that the industry is in the process of replacing. “Outages are a product of an ageing environment,” Clyne said. “You hope to minimise them.”

In other words, get used to it, because there’s still years to run on core banking replacement projects, and banks are running out of band-aids to patch their systems with.

The Commonwealth Bank continues to lead the race to renew technology, yet even it is running behind, with the cost of its re-platforming blowing out to $1.1 billion.

The good news for CBA, at least, is it’s now conducting intra-day settlement, which is the point of difference that matters most to the industry.

NAB’s payment glitches were magnified by settlement issues, turning a one-day glitch into a week-long saga. Likewise, Westpac decided not to switch over to disaster recovery after its recent data centre issue that sent down ATM, Eftpos and online banking, most likely because it would have created settlement issues. Until all banks move to real-time payments, downtime at one bank will continue to have a major flow-on effect to others.

It’s time the industry stopped making excuses and admitted it failed to foresee the critical, disruptive nature of online banking. Bankers were quick to close branches when they could foresee transactions being replaced by online banking, but less willing to think through the capacity and capability required when customers actually made the wholesale shift.

How will this translate to customer behaviour? Customers will respond to the bank that can deliver them real-time information on their financial position. This is particularly true of business customers that tightly scrutinise cash flow.

At the moment, Australian bank customers are living with the downside of legacy systems, but are yet to see the upside of the replacements. When they do, clear winners will emerge.