Banking on IT

Banks are pioneers in IT, but oh, so backward in it, too

In Britain, the financial services sector employs more than 6 million people – more than any other commercial sector apart from hotels, restaurants and distribution. It’s supposed to be a very conservative industry. Yet in terms of back office IT and practices such as offshoring, international financial services companies have been pioneers. For contemporary proof, look at ICICI OneSource, a specialist provider of financial processing services based in Mumbai, India, and its recent decision to create about 1000 jobs at a new Belfast contact centre and at a second centre in the north-west of Northern Ireland

And yet, and yet…. The pace of change is still agonisingly slow. I can remember working with cashpoint manufacturers in the early 1990s, wanting to add all kinds of functions to the humble ATM. They wanted to, too. Very little has happened about this in Britain.

Still, in Hong Kong, nine million people use an Octopus payment card to buy just about anything from silvery electronic kiosks. But even then, the user interface looks formidably complicated.

There is progress, but it takes decades. Again, take ATMs.

It was back in 1965 that James Goodfellow, a development engineer with Smiths Industries, invented and in 1966 patented a system comprising a machine-readable encrypted card and a numerical keypad, into which an obscurely related Personal Identification Number was entered manually. Chubb made the housings and the cash-dispensing systems for the electronic ATMs. And it was back in 1967 that John Shepherd-Barron, a Scots inventor and managing director of De La Rue Instruments, put in the first operational electronic ATM in Enfield, north London (its first user was the actor Reg Varney).

But what has happened in 40 years? Her Majesty the Queen has given both James and John a gong, at last; we’ve gone over the chip and pin, and there are some clever fraudsters up to tricks with ATMs. But ATM screens are still hard to read in sunlight. Worse, as Richard Seymour, of London product designers Seymour Powell, observed long ago, once you’ve entered your PIN, ATMs never ask you ‘The usual, sir?’

It’s the same elsewhere in financial services. My light blue bank still likes to send me a letter each time I phone to remind it that I have paid off a bit more off the mortgage I hold with it. It has yet to implement any form of instant messaging for consumers. Even the electronic displays in its branch, which tell me the date and which teller eventually to go to, boast philistine, armour-plated design and burn red, like they were made in the 1980s.

So don’t expect online, regularly revised forecasts of your past and future income and expenditure to come to your mobile phone, TV or PC any time soon.

In America, consumers and businesses now write 40 billion cheques a year, down from an estimated 50 billion in 1995. Meanwhile, in 2002, eBay paid no less than $1.5bn for PayPal, which organises online electronic payments.

Yet on close inspection, both these changes now look fairly modest. To eradicate cheques in America could take another 40 years, while to move from PayPal to a cashless society could take another 40 after that.

Perhaps we are chaining ourselves back. Certain, the more we let fraud become the leitmotif of all debate about electronic banking, the more the brakes will come on.