Mainframes are no longer mandatory

Financial institutions are turning to PC-based systems.

The mainframe may be ailing, but reports of its death are exaggerated. The distinction between enterprise systems based on traditional mainframe computers and PC-based client/server networks, however, continues to blur, as a pioneering small British bank has just demonstrated.

Businesses that still stick doggedly to the mainframe are typically those with massive online transaction processing requirements or "mission critical" applications. Some businesses, such as airlines and banks, fall into both categories. As a result, the take-up of PC-based client/server technology - and associated operating systems such as Microsoft's Windows NT - by the airline and financial services industries has been relatively slow, at least in their core business functions.

"IT people in the banking world are very conservative," says Chris Atkinson, Microsoft's European financial services manager. Persuading banks to move to Windows NT can be something of an uphill struggle at times, despite its advantages in terms of speed, cost and easier communications. "People don't believe that something that is a third of the price will do the same job." Nevertheless, he adds, once a technology has been proved in a few reference sites, "the floodgates open".

The financial services institution Unity Trust Bank has taken a lead within the UK banking world by switching its entire core banking system over to an NT-based client/server system. The bank was established 11 years ago by the trades union and co-operative movements, and has the Co-operative Bank as its main shareholder.

"Many of our customers are kitchen-table treasurers," says Steve Billcliffe, the bank's marketing manager. Unity Trust provides banking services to trades unions at national and branch level, as well as to charities, local action groups, Labour Party branches, church groups and voluntary organisations, he explains. In all, the bank has some 17,000 accounts, with 50,000 signatories.

Since its inception, Unity Trust has shared the Skelmersdale mainframe facilities of its parent, the Co-operative Bank. But it needed cost savings and improved online transaction processing, Mr Billcliffe says. In particular, the bank was aware of the opportunity to market its service to its account signatories on a personal basis - thus neatly stealing business from the high street banks with something that is, in effect, a smaller version of the telephone-based operation of First Direct bank.

Small banks and "credit unions" (roughly equivalent to British building societies) are a feature of the North American financial services market, and the Unity Trust Bank became aware of a PC-based banking system running the operations of more than 100 US and Canadian banks and credit unions. One, at Richmond Savings Credit Union, a $1bn bank in Vancouver, is claimed to be the largest PC-based online transaction processing network in the world.

The Richmond system handles more than 100,000 transactions a day for 250,000 accounts spread over 350 PC workstations throughout its branch network, as well as mortgage processing, statements and online links to credit card operators, telephone banking and credit bureaux. Although small by UK banking standards, Richmond ranks, by size, in the top 10 per cent of all North American financial institutions.

"The attraction of a system like this was obvious," says Mr Billcliffe, recalling how transactions on the mainframe computer had to be stored on tape and processed the following day. Bristol-based Apak Systems, the UK partner of the Canadian software company that developed the package, has now installed it at the bank. Totally localised for the UK banking industry, it comprises under 100,000 lines of code written in a specialist fourth-generation language called "Probe". This compares with some 2 million lines of code for the application on the old mainframe.

The total project has cost pounds 1.5m, and has an expected payback period of just three years. Unity's 75 workstations, based around Pentium 90 servers, are capable of processing an average of 120,000 transactions a day, with customers telephoning their transactions from throughout the country. "When we set out on the search for a new system, we assumed that our chosen solution would take years to develop, tailor and install," says Mike Osborne, Unity Trust Bank's finance director. "Instead, we had it up and running in just 12 months."