Banks to be hit with Microsoft costs

Banks to be hit with Microsoft costs

2014-03-14 19:52

London - Banks around the world, consumed with meeting more stringent capital regulations, will miss a deadline to upgrade outdated software for automated teller machines (ATMs) and face additional costs to Microsoft to keep them secure.

The US software company first warned that it was planning to end support for Windows XP in 2007, but only one-third of the world's 2.2 million ATMs which use the system will have been upgraded to a new platform, such as Windows 7 by the April deadline, according to NCR, one of the biggest ATM makers.

To ensure the machines are protected against viruses and hackers many banks have agreed deals with Microsoft to continue supporting their ATMs until they are upgraded, extra costs and negotiations that were avoidable but are now likely to be a distraction for bank executives.

"There are certainly large enterprise customers who haven't finished their migrations yet and are purchasing custom support," a spokesperson for Microsoft said, declining to name those customers or to quantify the extra revenue it is earning.

"The cost will depend on both the specific needs of the customer and what support they already have in place, so it's different for every customer."

Britain's five biggest banks - Lloyds Banking Group, Royal Bank of Scotland, HSBC, Barclays and Santander UK - either have, or are in the process of negotiating, extended support contracts with Microsoft.

The cost of extending support and upgrading to a new platform for each of Britain's main banks would be in the region of £50 to 60m ($100m), according to Sridhar Athreya, London-based head of financial services advisory at technology firm SunGard Consulting, an estimate corroborated by a source at one of the banks.

Athreya said banks have left it late to upgrade systems after being overwhelmed by new regulatory demands in the wake of the 2007-08 financial crisis.

"They were probably not very serious about the directive that came in from Microsoft. There's a lot of change going on at these banks at this moment in time and they would have seen Windows XP as one more change," he said.

Windows XP currently supports around 95% of the world's ATMs.

About 440 000 - or one-fifth of the world's ATMs - are located in the United States and many of the banks operating them will still be running their ATMs with Windows XP for a while after the April 8 deadline, said Doug Johnson, vice president for risk management policy at the American Bankers Association.

"One thing in our favour is that XP is battle-hardened," Johnson said. "People will benefit from years of fine-tuning of XP...It has been through wars."

Stand in line

The queue of banks waiting to upgrade means there aren't enough people to do the work.

"There is a little bit of a bottle-neck," said Johnson.

Some banks are using the upgrade as an opportunity to introduce new features to their ATMs such as being able to read cards that have microchips rather than magnetic stripes.

Banks in the United States, where the old-fashioned swipe and sign magnetic stripe credit cards are still in use, have to upgrade their ATMs to read chip cards.

JPMorgan, which has 19 200 ATMs, will start converting its machines to Windows 7 in July, with a goal of finishing by the end of the year. With the change, JPMorgan expects to improve data encryption and ensure machines take software upgrades more efficiently and be offline for less time.

A spokeswoman for the bank declined to say how much JPMorgan is paying Microsoft for the extended XP coverage.

Bank of America also said it would ask Microsoft to extend support for its machines still running on Windows XP.

Citigroup Inc, which has more than 12 000 ATMs worldwide, said it is in the process of upgrading its machines from XP and declined to give further details.

In Britain, RBS, which has been hit by a succession of IT problems, has agreed a fee with Microsoft in return for it continuing to support its 9 000 ATMs for up to three years, a source familiar with the arrangement told Reuters.

RBS will begin upgrading its ATMs to run on Windows 7 next year and expects to complete the process within three years, the source said. The investment is part of the £1.4bn each year which new chief executive Ross McEwan has committed in order to improve the bank's computer systems.

McEwan admitted in December that RBS had neglected its technology for decades.

Lloyds said it had agreed to pay Microsoft an undisclosed amount to extend support until 2016 while it upgrades its 7 000 ATMs. The bank will start upgrading its ATMs later this year.

HSBC, which has 3 200 ATMs, said it was two years into a three-year programme of upgrades which it expects to complete next year. It had also reached a deal with Microsoft.

Barclays, which has 4 300 ATMs, said it was still negotiating with Microsoft while Santander UK, which has 2 370 ATMs, said it had already agreed a deal.

  • Buzzbar - 2014-03-14 20:19

    Scary that the banks are only waking up to this now with 1 month to go....

      Mike Learview - 2014-03-14 20:29

      I am surprised that the banks are using Microsoft and not Linux, which I believe is both cheaper and more secure.

      Fourhundredkg Bobbejaan - 2014-03-15 17:06

      Mike, I see that there are already quite a lot of ATMs and FNB internet banking terminals running Linux. I wonder why anyone would bother to use Windoze for such an application in the first place?

      Gareth Phillips - 2014-03-16 09:17

      Microsoft can be held liable should their software be defective, nobody owns LINUX therefore the Banks are protecting themselves and their shareholders. Also the Banks prefer to use tested software and therefore will use older software which is stable and does not use as many patches and is more stable.

  • veektor.vahl - 2014-03-14 20:26

    ATM s still running on XP? JoJo.

      Jim Bean - 2014-03-15 07:41

      It's a special "embedded" version of XP. It's not a standard version like on your PC.

      veektor.vahl - 2014-03-15 09:39

      XP was a lekker OS but very vulnerable to security not want any version of it close to my banking.

      Jason Strauss - 2014-03-16 11:34

      Its seems so but I think viruses and worms even the evil one's can be blocked. Well you need to use the Firewall and have a proper anti virus installed. Ravmonlog and Trogan are two virus/worms that I've had fights with on Windows XP.

  • Piet Genade - 2014-03-14 21:07

    Use linux

  • Ian Lowe - 2014-03-14 21:23

    You go Bill. Gate them ....

  • michael.mckinon.1 - 2014-03-14 22:09

    And who pays for the additional costs ? The consumer yet again?? This is shocking governance .... What have Risk Committees been doing????

  • Mark Smith - 2014-03-15 06:59

    Stupid that Microsoft is so adamant they want to stop support for a os which is so widely used and valid in today's world. We not talking about a os that has been superceded. Win 7 cannot run on some of the machines out there its to resource hungry. We bought a brand new machine last year that only operates on xp. A very low powered machine which does its job

      Jason Strauss - 2014-03-16 11:18

      Microsoft doesn't rewrite the whole o.s program. The o.s base program stays the same. That's one of the reasons you could even install Windows 95 or Windows 2000 which would work but most likely not be compatible with the latest drives, etc. As for me Windows XP is my favourite but Windows 7 is just as good. Windows Vista i heard takes a lot of hardrive space.

  • George Longpants - 2014-03-15 07:03

    They deserve to pay and suffer now for using Microsoft. What idiot would use any MS product.

      Jim Bean - 2014-03-15 07:42

      About 10 billion idiots world wide. Who's the real idiot ?

      Jason Strauss - 2014-03-16 10:16

      That would be me. I'm running a dual boot system. Windows XP and Windows 7.

  • Mthokozisi Sniper Myende - 2014-03-15 11:20

    Aluta Continua EFF!! 4ward with Nationalisation of Banks!!! How could they fail to upgrade up to this moment whilst they are charging such exhorbitant banking fees n inflated interest rates....

  • willbeonekenobi - 2014-03-15 13:40

    Why don't they rather use Linux. It is not only free as in no cost but also the source code is freely available so that they can tailor the software to suit their own needs.

      Fourhundredkg Bobbejaan - 2014-03-15 17:09

      Yeah, our own Mark Shuttleworth sunk a whole of his own cash into Linux too, but the dumbo banks want to send our money to Microsoft for an inferior buggy product instead. *Facepalm*

      Fourhundredkg Bobbejaan - 2014-03-15 17:11

      With reference to the previous post by Mthokozizi, EFF is welcome to nationalise open-source software!

      Lukas Ekisjouvaader - 2014-03-15 22:56

      @Fourhundredkg Bobbejaan - I think you've just lost Mthokozizi. He is a classic example of a one bit brain with a parity error.

  • willbeonekenobi - 2014-03-16 17:14

    There actually are viruses that can infect and damage both Apple macintosh and Windows operating systems, as the systems are generally the same from pc to pc. Linux on the other hand if you find a loophole that you want to fix in the code you can do so (unlike the other 2 in which you cant) as the source code is freely available. In fact if by some miracle you get a linux pc gets infected with a virus, it will not damage the os as the virus would need to be run on the root/administrator profile. So if a person in linux runs a virus infected file in linux it will only infect his/her non-root/administrator profile.

  • John Short - 2014-03-16 17:50

    Amazed that the banks are using Microsoft!...... WTF!

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