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Citibank ATM crash puts light on creaky bank software
Thursday September 6, 2:38 PM EDT
By Mary Kelleher
NEW YORK, Sept 6 (Reuters) - A software glitch that took down Citibank's vast U.S. network of automated teller machines for hours on Tuesday and Wednesday is raising concerns that bank computer systems are growing old and frail.
Citigroup Inc's (C) Citibank said on Thursday its nationwide web of 2,000 ATMs is running again, but the outage is an embarrassment for the company that pioneered ATM technology and a possibly scary omen for the millions of Americans who now bank chiefly through cash machines, over the Internet and by phone.
U.S. banks were among the first companies to automate vast, complex back office systems. So, many now must upgrade archaic software programs while competing to give customers a complete array of state-of-the-art technology features, analysts said.
Several years of massive mergers also mean banks are grappling with the intricate task of patching together new, old and disparate computer systems around the country, with varying degrees of success.
"I would compare the (banking industry) to the air traffic control industry: they are both among among the oldest, antiquated systems out there," said Avivah Litan, an analyst at Gartner Research.
"You're going to see more failures because there are more systems," Litan predicted. "Even if the failure rate is only 1 percent, it's 1 percent of a lot more systems, so it becomes much more visible."
Others disagree, because big U.S. banks spend hundreds of millions of dollars every year on technology revamps and research. Moreover, they have already upgraded a lot of old code to prepare for the year 2000, so computers wouldn't read the last two digits of the year and think it was 1900 instead.
"Though some of the underlying systems are old, it doesn't mean they aren't extremely capable," said Diane Glossman, an analyst at UBS Warburg. "Banks spend an egregious amount of money on technology."
Citibank, one of the biggest consumer banks in the country with some 2 million retail customers, refused to elaborate on the problem, apart from blaming an internal software hiccup.
But analysts believe the problems stemmed from outdated backoffice software. The bank possibly was trying to upgrade aging personal authorization software that let customers access their accounts through the network, Litan said.
"My understanding was that it was very old software," Litan said. "If you look at bank systems, they have millions and millions of lines of code and it gets very difficult to maintain it, particularly as it gets older, especially because the programmers tend to leave. If you make a change anywhere, it's very risky unless you go through very rigorous testing procedures, which Citigroup normally does."
Another possible explanation was that Citibank hit hurdles while linking its systems with those of its recently acquired European American Bank.
Around the same time that Citibank ATMs were on the fritz, J.P. Morgan Chase & Co. Inc.'s (JPM) 1,900 ATMs in New York, New Jersey, Connecticut and Texas had their own problems.
Its system slowed down on Wednesday, delaying the response time between ATMs and the network and in some cases preventing people from withdrawing cash, a spokeswoman said. Again, the root of the problem was a software glitch.
The snarled ATMs are a bitter pill for banks like Citigroup to swallow. Citigroup was a leader in ATM technology, has racked up large technology bills and prides itself on cutting-edge technology advancements that date back to former co-chief executive John Reed.
"I have a feeling the folks at Citi are all over this, because this is embarrassing," said industry consultant Burty Ely. "No one likes it, least of all the bank, because it's a black eye....I wouldn't be surprised if they set up a high- level task force within Citi that says 'We're going to look at our ATM network top to bottom to make sure this sort of thing doesn't happen again.'"
-- Martin Thompson (email@example.com), September 06, 2001