Bank outages to last a decade: analyst

Australian bank customers can expect regular outages of key banking systems for the next decade, according to an analyst.

Australian bank customers can expect regular outages of key banking systems for the next decade, according to an analyst.


(Locked out image by Alan Turkus, CC BY 2.0)

In the wake of this week's "capacity issues" from Westpac, where many customers were unable to log-in to their online banking accounts, IBRS analyst Jorn Bettin has told ZDNet Australia that customers should expect more of the same.

"These [banking] issues will keep dragging on over the next five years, if not 10," Bettin said.

Bettin added that the problems aren't limited to one specific bank, either.

"All large banks are struggling with [system outages]. You've got some systems which are 30 years old which some banks are now trying to replace, leading to costly transformation projects," he said.

Banks need to divide their investments between costly core system renovation projects and a commitment to quality assurance procedures when it comes to deploying new hardware, software and interfaces for customers, Bettin said.

"Banking systems are far from trivial. If [banks] want to completely exclude these issues, [they] need to invest heavily in quality assurance measures."

The IBRS analyst also warned that if large banks continue to neglect ageing core systems and fail to invest in quality testing, they could experience a loss of customer trust. This could damage the brand by leading to customers voting with their feet.

"Trust loss depends on whether they're financially impacted by this and whether people are really experiencing pain through the process. If it's a matter of not being able to conduct a transaction then they've lost some time.

"When it gets more serious is when you have errors in transactions or when transactions are duplicated and they need to be fixed afterwards. These kinds of mistakes have an impact on the trust that people have on these systems."

To restore customer trust, banks must learn from their mistakes, he added, warning that technology outages in the financial sector particularly take a toll on how Generation Y views an institution.

"The way that older generations look at the bank is quite different to the way younger generations look at the banks. The younger generation expects everything fast and online. If the service isn't available or is too slow and cumbersome, that has an effect on the organisation."

Technology outages have struck each of the major banks recently: Commonwealth Bank had an ATM glitch, Westpac suffered capacity problems that it attributed to "customers checking their pay", ANZ's EFTPOS went down and NAB had a colossal outage that messed with account histories and led to customers being without their money for days.

Meanwhile, young banks are lurking

Speaking at a Senate inquiry into banking competition, ANZ Bank CEO Mike Smith said that younger banks with fewer legacy systems would rise to threaten the position of the big four in Australia.

"Look at ING Direct, you've got a bank which is essentially internet-based, you don't have any branches and therefore is providing a service with a tiny amount of the cost that we have and can therefore be much more competitive. I think other such situations will occur [more often]," Smith said.

Bettin agreed, adding that smaller technology companies will offer to provide banking platforms to aspiring banks before the large banks have fixed their own infrastructure.

"Technology companies will offer core banking technology as a service [that] start-up financial organisations can rent and use to run their business. These types of services are already being used in some states and we'll see more over the next five years," he said.