Are UK Banks’ Software Codes Outdated?

Research from Baringa shows that banks are still dependent on systems written decades ago. 2/3 of bank leaders estimated that their oldest programming code was created before 2000, and almost a third said parts of their infrastructure date back to the 1960s. A separate survey of 200 UK banks found that 16% still use software from the 1960s and nearly 40% continue to run code from the 1970s.

The areas most often running on these older systems are payments and transaction processing, customer relationship management and call centre operations. In some banks, core platforms still run on Cobol, which is a programming language that became popular way back in the 1970s. One bank admitted that its ATM network runs on Windows NT servers first launched in 1993.

What Problems Do Banks Face?

Baringa found that 68% of banking leaders believe their current technology structure limits how well they can serve customers. Two thirds said that a failure of their oldest code would be catastrophic for their business.

A major problem is knowledge as over 75% of bank leaders said their organisation has only 1 or 2 people with the skills to manage the oldest code in use. In many cases these specialists are close to retirement age, creating a risk that their knowledge could be lost. Some institutions are effectively dependent on a handful of people to keep entire systems running.

Banks are also hesitant to replace older systems because of the uncertainty that comes with choosing new tools. Almost one in five leaders said their biggest risk in digital investment is selecting products that cannot adapt as technology changes. The rapid pace of updates makes it difficult for banks to decide when and where to spend large sums.

Do Customers Care About Outdated Systems?

Customers have shown they care strongly about digital experiences. Baringa’s survey of 4,000 consumers found that 62% had either switched or thought about switching banks because digital services did not meet their needs. Half of all respondents had changed their main financial institution in the last decade, and 36% had done so in the past 5 years.

The reasons behind these switches have changed. Security and digital experience have become far more important, rising by 378% and 145% as deciding factors for customers choosing new banks. Among people aged 18 to 54, 80% said they are comfortable having an entirely digital relationship with their bank. Yet only 59% of them are satisfied with the digital service they receive.

Customers under 24 were even less satisfied, with only 53% reporting that they were happy with their bank’s digital service. This shows that younger groups, who are most likely to expect seamless digital tools, are harder to please.

Is Customer Loyalty At Risk?

Customer loyalty appears weaker than in the past. Over a third of respondents said they had switched banks in the past 5 years, choosing better digital services rather than competitive rates. This has left banks vulnerable to competition from digital-first providers.

Loyalty matters because of cost… Baringa calculated that banks spend between $200 and $300 to attract a single new customer, while keeping an existing one costs only $25 to $35 per year. Those that deliver better digital engagement see up to 25% higher customer retention and a 20% increase in cross-selling success.

David McGibbon, a partner at Baringa, said: “Our research shows that consumers don’t change their banks often, but digital experience is a key driver when they do. While 90% of bank leaders believe their institution performs well against digital experience, consumers are looking for better app and website experiences. The challenge for banks in this rapidly changing and uncertain market, is that many institutions also face technology challenges including cybersecurity risk, scalability and integration complexity, complex enterprise architecture and legacy systems.”

So, Are Bank Codes Outdated?

The evidence suggests they are. Code from the 1960s and 1970s continues to run in many banks. While these systems may still function, they create risk when knowledge is held by only a few employees and when customer expectations keep changing.

Banks face a choice between holding on to old systems or moving to newer technology that better serves customers. The age of their code is no longer technical because it is now a factor that actually determines customer loyalty and long term performance…