Incentives of 0% interest on credit cards and loans for one year
for the first 25,000 people to apply for accounts prompted a rush
to Cahoot, Abbey National's Internet bank. But its IT systems were
unable to cope. Guy Campos reports
What does the disastrous launch of Cahoot, the standalone
Internet bank from Abbey National, say about the trade-off between
speed to market and systems reliability?
Following its launch on Monday last week (12 June), the bank's
Web site crashed on its first day, was unable to accept
applications for accounts for most of its first two days and went
down again on the fourth day.
Similar problems at Egg, the standalone Internet bank launched
by Prudential in October 1998, suggest such crashes are an
inevitable risk in an age when the company that moves swiftly into
new markets reaps benefits that far outweigh the disadvantages of
technical failure.
But the successful launch of the Co-operative's standalone
Internet bank Smile in October 1999 showed that it is possible to
come to market fast without crashing.
So what was Abbey National's big problem? The answer, at the end
of Cahoot's first week, was that it was impossible to say because
the bank still did not know exactly what had gone wrong.
This much Abbey National was admitting to. The core banking
systems that customers used once they had been accepted were
working fine. But the registration application, developed
separately, was not.
That was not to say there was an identifiable problem in the
registration software, merely that IT staff were monitoring it to
locate the bug in the network. Customers were being allowed to
register in numbers that did not crash the system.
One of Cahoot's technology partners, IBM, said it was not
possible to test for every eventuality before launching an
e-banking Web site. But testing firms have pooh-poohed the claim on
the grounds that the registration application and its integration
with the network should have been one of the top priorities for
testing.
Take a look at what happened at Smile. Its testing company,
Keane, applied the same disciplines that were being used in systems
development years ago to the more complex multi-tiered systems
typical of Internet banking systems.
It devised a testing harness that replaced the client side of
Smile's architecture with a machine that mimicked the chaotic
behaviour of thousands of users, based on a study of human
behaviour. The company measured performance variables at all stages
of the network - in the Web servers, in the application servers and
in the mainframe - looking for cascade effects.
Testing tools
What were they looking for? One example might be incorrectly
configured software that worked perfectly with a small volume of
users but created serious bottlenecks when there were thousands of
concurrent users.
Keane developed a bespoke testing tool for the bank, that Smile
can use with new testing scripts, because the current range of
testing tools could not cope with the two separate 128-bit
encryption systems used in communication between the layers of
software at Smile.
Not that using standard testing tools would have been cheap,
with some suppliers charging hundreds of pounds per concurrent user
simulated. To ensure that speed to market was not impaired, testing
took place throughout the project - a practice that also aids
application development.
One of the factors Keane stresses as most important to the
successful launch of Smile was the involvement of the Co-operative
Bank's strategy department in developing and specifying its
e-banking systems. This strategy department had substantial
previous experience of e-banking for the main Co-operative Bank
brand going back 18 months prior to the launch of Smile.
Abbey National too had several week's successful experience with
e-banking for its mainstream banking brand but chose to use
standalone systems for the Cahoot brand which was designed to
attract a younger, Internet-savvy customer base.
Commitment
Even before Cahoot's launch, stockbroking analysts at Morgan
Stanley Dean Witter were questioning the commitment of Abbey
National's senior management to the Internet bank, saying that they
had come away from an Internet strategy briefing with the
impression that the bank's heart was not in it. This could be seen
in modest targets for take-up and a decision to run the Cahoot
business with just 56 staff.
However, an Abbey National spokesman said other analysts were
more impressed by the bank's commitment to providing its services
over the Internet. "It was clear at the Internet strategy event,
which covered retail, business-to-business and Cahoot, that most of
the analysts I spoke to were very impressed."
As it was, Cahoot's marketing department could not have dreamed
up an incentive scheme for new customers that was better designed
to produce a one-off surge of Web site hits than the one it chose.
The incentive was 0% interest on credit cards and loans for one
year for the first 25,000 people to apply for accounts.
One customer, who described his experiences using the online
name Madwolf at the consumer finance Web site motleyfool.com, said
he planned to use the overdraft for a year and then close it as
soon as the special offer ran out.
Commenting on Abbey National's claim that it had experienced
"unprecedented demand" for Cahoot's services the user said, "Since
they had just opened it was bound to be unprecedented but given
that they were offering 0% APR on credit cards and overdrafts it
shouldn't have been unforeseen."
Following the disastrous launch of Cahoot, Halifax has announced
plans to stagger the launch of its standalone telephone and
Internet bank Intelligent Finance, by launching its telephone
banking service first followed by its Web site 10 days later.
Abbey National may still not know what has gone wrong with its
systems but other banks are already learning the lessons of its
experience.
Cahoot seeks royalties on software sales
Abbey National's Internet bank Cahoot is planning to collect
royalties on the sale of its e-banking software to other financial
institutions. That is when it has worked out what has gone wrong
with its systems.
Cahoot plans to collect the money from Fiserv on sales of
Straight Through Processing. The software enables customers to
perform banking transactions, such as applying for an overdraft,
without human intervention from Cahoot.
While the source of Cahoot's problems are not known, Fiserv has
pointed out that its core banking and contact software delivers
industry-leading uptimes for other financial institutions such as
HFC, ABN AMRO, Banco Comercial Portugues, CIBC and Birmingham
Midshires. Fiserv did not provide the registration application that
is under suspicion and Cahoot carried out its own systems
integration.
A Fiserv spokesperson said, "It would be entirely inappropriate
to criticise any of the partners involved in the project at this
stage. Criticising Fiserv in particular would be like blaming
Tarmac for the congestion on the M25."