In 2017, Reuters published the following findings from a piece of research conducted by Celent, Accenture, IBM and others, into the technology supporting major US banking systems:
- 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 computer programming language designed by an astonishing woman, Rear Admiral “Amazing” Grace Hopper, in 1959. And no, that’s not a typo. At a time when trillions of pounds are transacted every year, and with the UK economy depending on six banks to keep the show on the road, regulated banks are relying on a computer language that’s nearly 60 years old, designed for an age when computers as powerful as your smartphone filled entire rooms.
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).
Innovation among the big banks is slow at best, and it’s easy to see why – the technology that promised to liberate banking in the 1960s has today cemented the industry in analogue processes. But when asked the question “why do 80% of transactions and 95% of ATM swipes still rely on COBOL?”, the answers from those in banking have ranged from “if it ain’t broke, don’t fix it” to “it’s too big, too risky, and too expensive to change”. Imagine you’re the CEO of a major bank – would you bet on a migration project that could destroy your entire 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.
The position of those of us in fintech is that the retail business of major banks is in terminal decline because of their outdated attitudes towards customers.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.
Alex Letts is founder and Chief Unbanking Officer of U. His disruptive career has brought digital technology into the advertising industry, electronic trading into the Lloyd’s of London insurance market and, now at U, a transformation of the retail banking current account model.