Written by Alex Letts: Founder of U
In 2017 Reuters published a synopsis of findings from US banking research carried out by Celent, Accenture, IBM and others. The statistics were almost as sensational as they were terrifying:
· 43% of banking systems are built on COBOL
· 80% of in-person transactions use COBOL
· 95% of ATM swipes rely on COBOL
· 220 billion lines of COBOL are in use today
For the less tech-savvy among us, COBOL is a programming language designed by an astonishing woman, Rear Admiral “Amazing” Grace Hopper, in 1959. And no, that’s not a typo — 43% of US banking systems run a computer language that’s nearly 60 years old, designed for an age when computers as powerful as your smartphone filled entire rooms.
I have no idea what the percentage of UK banks running COBOL might be; but of our big six banks, who control 90% of the UK’s retail banking market, perhaps the figure is a bit closer to 100%?
At a time when trillions of pounds are transacted every year and the UK economy depends on six banks to keep the show on the road, how is it that regulated banks can be allowed to rely on punch-card-era technologies?
Now, this is a direct call to Lloyds Banking Group and RBS: I’m told that some personal current accounts within your systems calculate transactions in pre-decimal format. This may be apocryphal, so please do let me know if that’s a myth.
Against this backdrop it’s easy to see why new fintechs get so excited:
“I’ve never seen a big bank do something cool — if they did, we wouldn’t exist.”
— Nikolay Storonsky, Founder of Revolut (Daily Telegraph, 10 April 2018).
The banks continue to struggle to innovate, and it’s easy to see why they make such slow progress. The very technology that promised to liberate banking in the 1960s has instead cemented analogue processes at their very heart.
For those wondering why COBOL still runs in 95% of ATM swipes, and in 80% of all transactions, the answers from those in banking range from “if it ain’t broke, don’t fix it” to “it’s too big, too risky, and too expensive to change”. If you were CEO of a major bank, would you bet on a migration project that could destroy your company if it went wrong? Perhaps it’s easier to keep the underlying ‘deadware’ on life support and pass the problem on to your successor.
So what happens when the expertise to support COBOL literally dies off? That’s a real scenario. The rumours of one bank even making calls to a nursing home seem credible.
We fintechs believe that the retail business of major banks is in terminal decline because of their outdated attitudes towards customers. But below the surface there is a greater truth — their 1950s attitudes survive largely because of the 1950s code designed by a person born in New York in 1906, just after the end of the Boer War.
