The Banking Commission has said investment is needed in the “patchy and outdated in-house IT systems” at banks, calling for the inclusion of IT experts in a panel to investigate making it easier for consumer to switch accounts.
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In its final report, Changing banking for good, the Commission said moving to common platforms will make it easier for consumers to change accounts and encourage banks to "make much needed investment into their patchy and outdated in-house IT systems.”
The banking industry has already stated that UK bank customers should be able to switch bank accounts within seven days by September this year, but the Commission wants to go further.
“A common utility platform is an intellectually appealing idea and has the potential to introduce much greater competition into the market than a seven-day switching service," read the report. "The benefits of a common utility platform include improving competition through significantly faster switching times and reducing the risk that consumers will encounter administrative problems as a result of switching their bank account provider."
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The Commission wants banking IT experts to be involved in a panel to investigate and report on technical feasibility, costs and benefits of options available to make it easier for consumers to change accounts.
It recommended the government immediately initiated an independent study of the full range of options for reform in this area.
“Membership of the panel should be drawn from banking IT specialists, retail banking competition experts, economists, representatives of retail consumers and small businesses and resolution specialists,” it said.
The Commission said should report within six months of its establishment for switching and within 12 months on other issues.
“It should also examine the scope for reducing downwards from seven days the time it will take to switch under the new switching service,” added the report.
Hugh Cumberland, solution manager, payment and settlement services at Colt - a provider of IT services to the financial sector - said: “Despite the reference to having a ‘patchy and outdated’ technology infrastructure, the financial services industry is unlikely to take a knee jerk reaction to this report. When it comes to IT, the majority of banks will continue to keep business critical systems on premise for many years to come.
"Banks have always maintained large IT resources in-house and it is simply not cost effective, or practical, to completely rip and replace their existing infrastructure.
“This isn't to say that banks shouldn’t re-evaluate certain elements of their IT, and look to put in place a more flexible, agile infrastructure where they can buy compute on demand. For example, with smaller non-business critical back office systems, banks can benefit from a cloud based model.”