What’s piqued my interest this week?
One of my threads of thought this week has followed the TSB issues and a Radio4 Moneybox episode a few weeks ago. It transpires that fraudsters used the opportunity to see others bank account information during TSB’s blunders as a a good ticket to cash-out town. This week we had the admission from TSB that at least 1300 customers lost money due to fraud as a result of their IT changeover (1). Nils Pratley at the Guardian sums it up nicely; for all TSB apologises, it doesn’t change the incompetence (2). Between this, and a discussion with YFG on an old Full English about the TSB debacle, I decided to have a chat with some friends who work IT security. One is a white-hat hacker, the other works as an IT security consultant and provides subcontracted coding services (as well as currently writing some code for a little spin-off). Both confirmed what I had read before; that the monolithic goliaths that are the main high street banks have pitiful IT infrastructure.
It makes sense. These are banks founded on the premise of an on-site vault, a list of ledgers and a network of staffed branches. Their IT was adopted ad-hoc, as a necessity, developed or brought in to fit the old model. The old model was anachronistic, it included human foibles and errors, and a degree of leniency to allow for it. Trying to bring in coders, explain and then cram all that into Windows 3.1, then 95, then 2000, etc was never a long term solution. IT departments are not the moneymaking focus of a high street bank, they don’t win all the praise, so the funds will only stretch to essential patching. This is not safe. Threadneedle street is trying to combat this by setting cyber security challenges to recruit IT experts to bolster their security (3)
Sadly, there lies my concern. A bank, by definition, should be a safe place. Your money no longer resides in a huge locked vault. It sits on an online ledger, protected by minimally patched although mostly secure firewalls and security systems. Security systems prone to outages and instability, as Tesco Bank customers found this week (4).
Which is why I find ‘challenger banks’ so tempting. The Starling Bank CIO, John Mountain (strong name), was interviewed last September about working at a bank that is challenging traditional IT thinking (5). Starling have released their API and ran a hackathon of their systems at London Campus in April this year (6). Anne Boden, the Starling CEO, is reported to have said that a bank should not have an IT department, as it’s whole business is now IT. In John Mountain’s words:
“We don’t run a technology function here because the whole business is a tech function”
Will I move all my money into ‘challenger banks’? Probably not. The Rothschilds’ don’t throw their banking system out with the bathwater every time there’s a systemic crisis. Traditional banks will have to learn the hard way, as TSB are doing. For the time being I’ll split my pots as, after all, a bit of diversification can’t help can it?
Have a great weekend,
The Fire Shrink
Side Orders
News:
- Government loses £2.1bn on RBS stake sale (7)
- For some reason I ended up down a internet rabbit-hole looking at bonds, and was reading about Crossrail (8)
- The pay freeze ends for NHS workers (9)
Blogs/ Opinion pieces:
- YoungFIGuy reflects on University interviews, and the establishment (10)
- DIY Investor UK on the old active-vs-passive debate (sort of) (11)
- Another internet rabbit hole, Firevlondon’s post about a billionaire’s investments led me to read about angel investing. This post from Indian blogger Letsventure was summarising some points (12)
- The Psychology of Money – Collaborativefund (13)
What I’m reading:
When Breath Becomes Air – Paul Kalanathi – Useful for a sense of perspective
Enchiridion by Epictetus – Bedside reading for a bad day
References:
- https://www.theguardian.com/business/2018/jun/06/tsb-admits-1300-customers-lost-money-from-accounts
- https://www.theguardian.com/business/nils-pratley-on-finance/2018/jun/06/tsb-apologises-a-lot-but-its-real-problem-is-about-competence
- https://www.cio.co.uk/cio-interviews/bank-of-england-cio-robert-elsey-sets-cyber-security-challenge-3678401/
- https://www.theguardian.com/business/2018/jun/05/tesco-bank-customers-shut-out-from-online-and-mobile-services
- https://www.computerweekly.com/news/450426542/CIO-interview-John-Mountain-Starling-Bank
- https://www.starlingbank.com/hackathon/
- http://www.bbc.co.uk/news/business-44366731
- https://www.telegraph.co.uk/finance/newsbysector/transport/8613090/Crossrail-financed-by-600m-bond.html
- https://www.theguardian.com/society/2018/jun/08/nhs-workers-agree-pay-rise-three-years
- https://youngfiguy.com/why-having-your-hopes-and-dreams-crushed-can-be-a-good-thing
- http://diyinvestoruk.blogspot.com/2018/06/equities-outperform-bonds.html
- http://blog.letsventure.com/investor-insights/top-9-tips-to-be-a-successful-angel-investor/
- http://www.collaborativefund.com/blog/the-psychology-of-money/
The FIRE Shrink 
I’d like to thank you for drawing my attention to challenger banks. Whilst I wasn’t adversely affected myself, I do have a TSB account. Also a Tesco bank account! Both hold my emergency funds which got me thinking what would happen if I did have an emergency and I couldn’t get to my money??
I’ve noticed your goal in your Financial Dashboard posts:
“Set up a Starling/ Monzo/ Atom/ Revolut account for day to day transactions.”
I’d heard of Monzo and Atom so thought I’d do some research on Starling and Revolut. In the end, I opened a Starling account as I liked what I read about the company and thus far, I’m really impressed with it. Opening the account took 10-15 mins, a day later my account was set up. Like you, I wouldn’t move all my money into a challenger bank but it doesn’t hurt to split the pots.
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Thanks Weenie, always a pleasure to intoduce a FIRE veteran such as yourself to something new.
I assume you saw this article at the torygraph I linked to? https://www.telegraph.co.uk/personal-banking/current-accounts/monzo-atom-revolut-starling-everything-need-know-digital-banks/
I agree that Starling looks the pick of the bunch. I’m likely to bank with them myself. It is a little more mainstream and traditional than the others, which truly are way outside of high street banking structure, but through Anne Boden has a CEO with a strong banking pedigree, and the full FSCS protection, a banking licence are encouraging. It also has a (somewhat pitiful) interest rate, which the others don’t.
There’s a huge number of ‘challenger banks’, so I might do a round-up at some point in the near future.
https://www.bankingtech.com/2018/05/uk-challenger-banks-whos-who-and-whats-their-tech/
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Yes, I’d read that Torygraph link and then recently, Anne Boden and Starling popped up in something celebrating women in tech and finance and I recalled seeing Starling in your goal of setting up a challenger bank account. The fact that it seems a bit more traditional is why I chose them and yes, it was Boden’s credentials which put me at ease. Not really fussed about the paltry interest rate but it is better than nothing!
Thanks for that other link to challenger banks – I haven’t heard of most of those (although one of my friends works for one of them!) and I had no idea that Monzo was previously Mondo – doh!
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I’ve not thought too much about how traditional banks have morphed their IT and whether it’s their priority or not. I have just started looking into Starling bank as read a couple of reviews of their business account. I think I shall add Monzo and Atom to the research pile.
I’ve recently been chasing the switching bonuses but once those run out I’ll need a home for that account, might as well make it a challenger bank. Thanks for an interesting and thought provoking read.
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Thanks Tuppenny,
I’m not in the business of advocating anything, but the challengers are certainly shaking things up. I’ve just posted a couple of links under Weenie’s comment to some other challengers, who are also worth a look. Thanks for reading!
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Well it sure has got a whole lot worse than when you wrote about the banking IT fiasco a week or so ago FIRE Shrink. Oh dear! Very interesting to hear from your IT expert friends. At least a few years ago there were still some NHS computers running on Windows 95 and Windows 2000.
I like the John Mountain quote. That’s the attitude that businesses really need to have when it comes to IT.
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Just to add – after commenting last night I had a look about Starling and was very impressed. Opened an account today. It was incredibly easy and straightforward – almost to the point of being pleasurable!
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Should have set up some sort of affiliate link scheme, looks like you weren’t the only one.
https://www.thesun.co.uk/money/6517056/starling-bank-account-martin-lewis-recommendation-app-crash/amp/
But seriously, my impression has been completely favourable. I spend a fair bit of time abroad for conferences, and I’m looking forward to the free exchange at MasterCard rates!
In response to your other comment, I was informed that a lot of the problem is while the front end of most consumer banks has been renovated periodically to keep up with trends and style, the backend has had relatively little investment. Minimal overhaul of server architecture and infrastructure. Working in the NHS I use XP daily, but most gradually upgrading to Windows 7 (!). I remember one backwater hospital where I was training <10 years ago still running some systems on MS-DOS.
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Haha, you should have done FIREShrink – you helped get me sold! I looked at Stirling’s twitter feed this morning, it seems like they’ve had a blow-up from Martin Lewis blugging it on TV this morning. I had no problems though.
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