Banks in the UK are pouring money into patching up ageing legacy systems, according to a new report, with estimates suggesting the practice is costing the UK economy around £30 billion every year.
The main concern is that many of the systems still in operation today are over 30 years old, which means many banks spend resources and capital on protecting these systems and patching them up.
One example of a legacy system or technology still going today is Bacs, the payment technology used by retail banks. This has been in use since 1983 and a form of it is still in use today after a number of bolt-ons and small changes.
However, the cost of a transaction is still the same in relative terms, as it was in 1900.
Technology expert Tim Simon told Saxo Group that the fact banks own the payment systems is a problem as there is limited competition in the market and there is no desire to innovate and improve.
However, new technology and more forward thinking modern banks are beginning to change the payment systems in place, offering consumers and businesses innovative ways to make payments.
With such little development in the old banking industry, these companies are finding it difficult to keep up and they are hampered by their old process, procedures and systems.
Mr Simon explained that peer-to-peer lending has already begun to attract significant attention, due to the fact costs can be reduced dramatically when compared with traditional systems.
P2P lending is estimated to be 60 per cent more efficient than the current systems in place, as intermediaries are removed from the equation, which is appealing to businesses all over the world.
Overall, the market for newer banking systems is estimated to have tremendous profitability and growth in the coming decade, with some estimates stating that the new way of doing business could jump to £45 billion in the next ten years.
By Gary Cooper