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RBS talks up digital improvements in the wake of its IT fiasco

Derek du Preez Profile picture for user ddpreez April 29, 2015
RBS, an 80% taxpayer-owned bank, reported a £446 million loss for the first quarter of 2015 – but it is optimistic about future plans.


Royal Bank of Scotland
The Royal Bank of Scotland (RBS), one of the largest banks in the UK and one which is 80% taxpayer-owned, has started to talk up some of its digital investments and releases in its latest set of results, which in recent quarters have struggled to shy away from the ripple effects felt by the bank's IT fiasco in 2012.

Despite reporting a loss of £446 million for the three months to 31 March, RBS said it was making good progress towards its aim of creating a “stronger, simpler” business. And much of this is down to its restructuring of its legacy IT systems, which have held back the company and left it facing fines from regulators.

Chief executive Ross McEwan warned that despite the good progress it wasn't going to be an easy ride. On the earnings call he said:

We continue to deliver on our commitment -- or the commitment I made in February to change our competitive positioning. We've called time on teaser rates and zero balance transfers that had eroded the trust of our customers, and we will continue to look at ways that we can put further pressure on practice in the U.K. banking sector that confuse and penalize customers.

But as has become customary over the last few quarters, let me sound that familiar note of caution. We are actively managing down a slight of significant legacy issues. This includes significant conduct and litigation issues that will continue to head our profits in the quarters ahead.

So while we are pleased that we've had 3 strong quarters of financial performance, we are not complacent about the challenge ahead. There will be plenty of bumps in the road, and we have much more work to do. But we are focused on our plan to make RBS the most trusted bank with the best customer service in the U.K.

RBS mobile
RBS mobile app

In the summer of 2012 RBS suffered a major software glitch that left customers without access to their bank accounts for extended periods of time. The outage affected more than 6.5 million customers over several weeks and resulted in the Financial Conduct Authority fining the bank £42 million and the Prudential Regulation Authority fining the bank £14 million.

Worse than the fines, restructuring costs at RBS increased to £1.2 billion during 2014, including a £247 million write-off of software assets.

The bank's plan is to 'simplify' its core business, which will include reducing its banking systems used across the group from 50 down to 10. Its 80 electronic payments systems will also be reduced to approximately 10, according to Computerworld UK, with a bank-wide payments platform to “support all segments, geographies and payments schemes”.

In RBS' 2014 full year report, it said:

RBS’s information technology systems may be subject to failure. As such systems are complex, recovering from failure is challenging. To mitigate these risks, a major investment programme has significantly improved the resilience of the systems and more benefits are expected. Back-up system sustainability has improved, and a ‘shadow bank’ system, to provide basic services, if needed, has been created.

However, moving away from all the doom and gloom, this quarter the bank took the opportunity to highlight some of its digital investments, many of which are customer facing, in order to showcase how it is trying to use technology to improve customer experience.

Some of the highlights include (quotes taken directly from the report):

  • RBS UK personal and business banking has upgraded its mortgage platform and increased the number of mortgage advisors by 91 or 12% to 835 compared with the start of 2015, strengthening its capacity to support UK house buyers. Further steps were taken to enhance customer experience in digital channels, including fingerprint login to the mobile banking app.
  • Ulster Bank made further progress during Q1 2015 to enhance its customer service offering. A fully digital account opening option was introduced for personal customers in Northern Ireland, speeding up and simplifying the account opening process. The bank’s contact centre announced 350 new jobs which will handle customer calls across a number of RBS brands.
  • The pilot of a new online on-boarding smart form in CPB saw a 75% reduction in pages that a customer received in order to fill out their application. This is now being rolled out across the business.
  • RBS became the first UK-based bank to enable customers to log in to their mobile banking app using only their fingerprint, recording over 22 million logins since launch.
  • Real Time Registration allows new customers to have access to mobile banking within 1 day of an
    mobile banking and finance © Oleksiy Mark -
    account being opened. This gives customers the functionality that Mobile offers: Get Cash, Pay your Contacts and much more without having to wait 3-5 days for their Debit card to arrive.

My take

Still a long way to go for RBS, but investments had to be made and restructuring was necessary. Banking legacy systems are some of the oldest and most complicated out there, with many still operating on mainframes. And with the emergence of digital-only banks, as well as new high-street banks that have the benefit of starting with the latest technology, the traditional players have to make the investments to keep ahead. Switching banks is being made easier in the UK now and customers will no longer put up with not being able to access their accounts because of an 'IT failure'.

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