London calling: "payments are missing"

From a brief scan of the morning headlines comes news of an IT glitch at the Royal Bank of Scotland. RBS Help announced via its Twitter account at 5:45 AM London time yesterday that "some customer payment are missing this morning -- we are investigating this issue as a matter of urgency," and further advised that affected clients could call or visit their branch if they "have been affected and need to access funds today." Six hours later, RBS reported that the underlying issue had been fixed and that all missing payments - reportedly 600,000 payments directed to client accounts at RBS, NatWest, Ulster Bank, and Coutts - would be restored no later than Saturday. While certain questions remain (like what sort of a payments glitch would take a three full days to resolve?), to RBS's credit, it attempted to get ahead of the issue quickly in order to allow customers to mitigate any problems that might arise from the bank's glitch. Somewhat predictably, some industry observers are already pointing to RBS's mainframe-based "legacy" payment processing systems as the root cause of the problem. Huh? The logic appears to be that systems that are old can't operate reliably, simply because they're old. One observer went so far to claim that the lack of courage was the key reason why banks delayed needed modernization projects (OK, courage was not exactly the word used, but you get the point). To put this in perspective, RBS is said to have roughly 20 million retail clients in the UK. RBS has yet to make an official statement on the matter, and so we're left guessing whether the 600,000 payments impacted by the glitch represented a small part, large part, or all of the bank's payment flow on Tuesday. (I'm guessing it's a small part, but that's no consolation to those who were impacted). The last time a similar outage in RBS's payments system occurred (in June of 2012), the culprit was found to be a problem with a systems upgrade, specifically a piece of software that handled the processing of payment batches. RBS has not yet officially commented on the cause or scope of the glitch this time, so much of what has been written in the last 24 hours is little more than speculation. What is clear is that most mainframe systems do work reliably on a daily basis - RBS is said to process on average more than 20 million payments a day - and systems rarely fail spontaneously of their own accord. So when RBS does comment on the situation, I will be looking to read the tea leaves for signs of the human element at work here - inadequately tested system upgrades or simple human error that was not immediately detected by the bank's internal controls. That's not to say that banks should ignore the opportunity to continually update and improve their legacy processing environment (they ought to!), but it does seem a bit cartoonish to treat every processing glitch as another call to action for wholesale systems modernization. The banks that do embark on systems modernization projects are not Cowardly Lions returning from the Land of Oz. Rather, they are forward-looking institutions that seek market leadership through the delivery of better products and a more satisfying banking experience for the customer. For these banks, innovation is the goal and IT agility is the route to their destination. Where front-office innovation leads, back-office legacy will follow, and so it will be in time with the mainframe. In the meantime, let's show some respect to our long-serving and trustworthy friends. Let's stay tuned...