TD Bank's Public Apology Following Core System Conversion's Service Disruptions: Other Banks Should Not Get Cocky

Banks don't like to go public about operational problems, breaches, or systems glitches, as I noted in a blog last week about how the industry deals with security and risk management issues. That's why I was surprised to see a full-page ad in this Sunday's (Oct. 11, 2009) New York Times from TD Bank with the headline "Thank you for your understanding."The ad, an open letter from TD's EVP and head of Retail Banking Fred Graziano, offered an apology for systems issues related to the bank's conversion to one core system following TD's merger with Commerce Bank. For four days in late September, there were delays in updating account balances and sporadic unavailability of online banking services. I also heard that at least in some locations new accounts could not be opened.

"Across the organization, our Employees are working tirelessly to resolve these issues. We are keeping our stores open longer and have empowered our Employees to support the unique situations of our Customers," Graziano stated in the open letter. In addition to the ad, a terse statement was posted on the company's Website: "TD Bank Update on Transaction Issue as of 5:00 a.m., Friday, October 9, 2009: TD Bank Customer account balances are currently up to date."

This is why core systems upgrades and replacements don't happen very often. No matter how many advances are made in programming capabilities, integration tools and workforce skills, the likelihood of something going wrong is very high, even in a "best case" scenario (lots of planning, lots of training, lots of communications, lots of involvement from key vendor partners, etc.). The headline of an article in the Philadelphia Business Journal stated what anyone in banking IT already knows: "TD Bank's integration woes not uncommon." According to the article, Munir Mandviwalla, Temple University's founding chairman of the management information systems department, is using TD's experience as part of the curriculum for one of his classes.

Before you start thinking, "Better them than us," consider this recommendation from Mandviwalla -- that when the SEC reviews mergers among financial institutions, it should incorporate IT issues into the review process. "Wall Street looks at the financials and marketing, but if there is an integration problem, it is the shareholders and consumers that lose out. Questions about integration can no longer be internal because the cost is too staggering. Integration strategy should be made public. In some cases, it might be wise to not merge because the costs are too high," he said in the article.

One more thing to worry about, right?

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio