For many years banks have suffered from what we call Successive Short-termism. With banking more than any other business, it’s all about delivering a constant and increasing return for shareholders. Bank CEO’s focus all their efforts on delivering now and enhancing CV’s and their personal worth in the marketplace.
Our established banks have constantly avoided the issuing of tackling ageing and ineffective legacy systems, the cost of which can be enormous. Back in 2008, Nationwide made a £1 billion commitment to transform their IT systems. Aside from Santander, not one single one of the other traditional banks have faced up to this massive commitment.
It’s not just that. Banks in the UK have been on the acquisition trail since the turn of the century. They haven’t done anything to replace any of the individual core systems operated by each bank and it’s even claimed that one High Street bank, following many takeovers, now runs off up to forty legacy systems. The industry standard worryingly would appear to be dozens. Additionally, it’s also become an industry dominated by contractors who constantly move on. This, in turn, means little continuity and an often fundamental misunderstanding of the core issues.
RBS, Santander and Lloyds Banking Group are just three of the banks to score massive IT own goals in recent times. In 2011 Tracey McDermott, the then Head of Enforcement at the FCA, commented that unless these issues were addressed, “it will be their [the bank’s] customers who suffer.”
Since then, these banks have chosen to do little to address this massive issue of potential customer detriment. This is despite them all being subsequently written to by the FCA on this very specific issue.
An announcement in February 2018 by Lloyds TSB sums this up perfectly. Incredibly, despite spinning off from Lloyds Banking Group back in 2013, it still continues to use its former parent’s IT technology. All of which in the previous year meant a huge £122 million increase in outsourcing fees.
With all of this as a background, what is the likelihood that all of the millions and millions of mortgages in the UK have been calculated exactly in accordance with their original loan offers and terms and conditions, which often can be complex?
With results showing discrepancies in 80 to 85% of mortgages checked to date, the proverbial writing may be on the wall for banks in what will be a massive and totally avoidable own goal.