Are More Bank Service Outages Coming In 2013?

What's Next In Payments®
4:52 PM EDT February 6th, 2013

Wondering why so many banks, financial institutions and payments companies have experienced service outages or glitches this year?

Look no further than a bank software system that, in many cases, is outdated, underfinanced and, occasionally unstable.

As this recent BBC article points out, in January 2013 alone we saw three major financial players: Lloyds Banking Group, PayPal and Bats Global Markets, suffer serious service outages. Lloyds was brought down by a glitch delaying wage and bill payments, some PayPal users saw duplicate charges and Bats had more than 400,000 trades fail to fulfill its best-price guarantee.

Add on the serious problems experienced by the likes of NatWest, RBS and others last year, a clear and unsettling pattern begins to emerge.

So what’s causing banks, payment services and stock exchange operates to function improperly?

According to Michael Lafferty, chairman of the research company Lafferty Group, the answer is simple: banks don’t put enough time, energy or money into maintaining or updating their software.

“There’s been massive underinvestment in technology in banks – it seems to be the case that the whole damn thing is held together by sticking plaster,” Lafferty said.

“Tough financial times mean a squeeze on budgets and less effort spent on modernization and quality assurance, added Lev Lesokhin, strategy chief at software analysis firm.

“Modern computer systems are so complicated you would need to perform more tests than there are stars in the sky to be 100% sure there were no problems in the system.

This means no single person, or even group of people, can ever fully understand the structure under the key business transactions in an enterprise. Testing alone is no longer a viable option to ensure dependable systems,” Lesokhin concluded.

One reason many bank software systems have become unreliable is because they’re outdated. Lafferty cited systems based on the Common Business-Oriented Language, or “Cobol,” as coming back into use despite their retirement 20 years ago. That code, according to Lafferty, was created in 1959 and is neither adequate for today’s environment nor familiar with younger developers.

Another problem is that many banks outsource their systems, buying software from third parties for which they cannot change the code. That leads to companies changing their existing infrastructure code instead: often a risky proposition.

“Software is inherently difficult,” noted Lesokhin, “and for developers who are dealing with systems which have been added to, cropped and changed over the years, it is a struggle to see where faults in a system are most likely to lie.”

To learn more about problems with banking software, read the original BBC piece here.

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