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Will legacy IT systems be the undoing of the banking sector?

Is a reliance on outdated IT concepts affecting confidence in the UK's banking sector? Rene Millman investigates...

Dan Mayo, chief analyst and practice leader of Financial Services Technology at analysts Ovum, says that sometimes problems are approached on a year-by-year basis.

"The CIO would let the next guy sort this mess out because in terms of hitting targets and bonuses it makes more sense to focus on what is going to add value this year," he says.

"It often takes a little bit of catalyst like you have seen with RBS, where something has gone wrong or the business is looking to make a fundamental change that actually drives this in the industry," says Mayo.

There is a need to take a longer term view in Mayo's opinion. He says the Nationwide Building Society is one of the few organisations thinking this far ahead.

"You see Nationwide starting this off back in 2008, as it was one of the few institutions that was able to take a view of the longer term," he says.

He also thinks the UK would be better off taking a look at the experiences of the Australian market.

"The first bank that did this (the Commonwealth Bank of Australia) has acted as a catalyst for the rest of the banks there. Because if suddenly one of the large banks has modern systems, that puts a lot of competitive pressure on the other banks because they can innovate and do more things in terms of improving customer service," says Mayo.

As such, Mayo says it will be interesting to see the impact of Nationwide and RBS' efforts to modernise their IT estates on their competitors. "If it gets its act together and can start producing some results from what its investing in, [this will act as a catalyst] for  the rest of the sector."

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