Technology is the lifebloodIt’s been a week since the country’s worst-ever electronic banking system breakdown at Nonghyup, the fourth-largest retail bank - and it’s still not fully fixed. Nonghyup officials are sounding like the boy who cries wolf with their repeated statements that the system will soon be back to normal. But the situation can worsen because the backup systems are also ruined. Bank officials assure clients that their financial records are safe, but their words are no longer convincing.
The Financial Supervisory Service and the Bank of Korea launched a joint investigation, and together with the prosecution, they will get to the bottom of the cause and determine the damage. But the problem is that public trust has already been broken. Consumers can no longer trust the computer systems of financial institutions.
Many fear that negligent management of electronic banking systems isn’t limited to Nonghyup alone. As the key financial watchdog, the FSS cannot avoid accountability. After all, Nonghyup has been subject to routine inspections by financial authorities every year.
But if the FSS was doing its job thoroughly, the series of accidents at financial institutions should not have occurred. The FSS should explain what and how exactly it conducted inspections on financial institutions. Other financial companies also should take heed and scrupulously re-examine their computer network, control processes, security and IT staff.
The recent glitches at Nonghyup and Hyundai Capital also underscore how ignorant the chief executives of financial organizations are of IT security. Financial companies still regard spending on IT systems and IT security as costs instead of investments, despite the industry’s increasing reliance on technology.
In fact, spending on computer system upgrades by financial institutions decreased to 770 billion won ($707 million) in 2009 from 1.2 trillion won in 2008. Nonghyup also slashed its budget for technology to 4.8 billion won last year from 7.15 billion won in 2009. Data processing and management have been mostly outsourced. When accidents occur, there is no one in headquarters who can explain the crisis.
Top foreign banks are entirely the opposite. They not only invest heavily in IT security but also know that one glitch can cost the bank its credibility. Local financial institutions should learn a hard lesson from Nonghyup’s incident. Technology is the lifeblood of financial services, and the cost of malfunction can be deadly.