Royal Bank of Scotland (RBS) has outlined plans to cut costs and improve customer services, slashing the number of IT systems in the process.
RBS said it will reduce the number of technology platforms by over 50% and reduce the number of core banking systems from 50 to 10. It will cut the number of payment systems it uses from 80 to 10.
Before the credit crunch RBS went through a stage of growth through acquisition and, as a result, the bank has many IT systems with significant overlap.
“This simplification is intended to deliver significant improvements to services delivered to our customers but, at the same time, serves as the cornerstone of a programme designed to bring our cost base down from £13.3bn in 2013 to £8bn,” said RBS.
One senior IT professional in the banking community said consolidating applications is worthwhile, but it is often difficult to secure the budget.
He said: "It is expensive to decommission systems. Banks don't normally prioritise budget to it because they think, 'why invest in something that you are getting rid of?'"
The bank today announced a loss of £8.2bn in 2013.
Litany of IT problems
RBS has hit the headlines several times in recent years as a result of IT failures.
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In December 2013, following major IT outages which stopped customers making online and in-store card payments on the busiest shopping day of the year, RBS CEO Ross McEwan said the failure of systems was unacceptable and blamed years of underinvestment in IT for the issues.
"For decades, RBS failed to invest properly in its systems. We need to put our customers' needs at the centre of all we do. It will take time, but we are investing heavily in building IT systems our customers can rely on," he said.
In July 2012, RBS, NatWest and the Ulster Bank customers could not access their accounts for days, as a result of software issues. The glitch in the CA7 batch process scheduler ended with 12 million customer accounts being frozen. Customers could not access funds for a week or more as RBS, NatWest and the Ulster Bank manually updated account balances.
In March 2013, the bank experienced further disruptions as ATM, online and telephone banking services were hit by IT problems, resulting in customers having difficulties in making cash withdrawals, making debit card payments, and using online and telephone banking.
But many in the banking sector do not just blame the technology, but its management. Banks are notorious for relying on legacy systems. They use mainframes that have been running for 40 years, and these have been the traditional place to point the finger of blame when things go wrong. But these systems work – it is the lack of understanding of them that is the problem, according to many in the industry.
Problems of banks outsourcing offshore
Recent cost-cutting pressure and the increased use of outsourced services, including those provided from offshore locations, are now also being blamed.
For example, the CA7 problems were linked to offshoring, according to a source close to it. “The CA7 incident happened barely a week after the UK experts had been laid off and was to do with a standard system upgrade,” said the source close to RBS. “In the end it was such a mess that the original experts had to be recalled to sort it out, on high pay rates.
“It was impossible to devolve 30 years of experience in the few months of handover. Cross-training was attempted, but with the throughput of people in India – as fast as they were trained, many went off to get better jobs somewhere else – all the intellectual capital was lost.”
There has been speculation in some quarters – denied by RBS – that IT boss Mike Errington will be a casualty of RBS's cost cutting plan, known as Project Cook.