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Banking on change: information systems and technologies in UK high street banking, 1919–1969

Published online by Cambridge University Press:  05 November 2007

Bernardo Bátiz-Lazo  and
Peter Wardley
Bernardo Bátiz-Lazo
Affiliation:
School of Management, University of Leicester, Ken Edwards Building, University Road, Leicester LE1 7RH, UK, b.batiz-lazo@leicester.ac.uk
Peter Wardley
Affiliation:
School of History, University of the West of England, St Matthias Campus, Oldbury Court Road, Bristol BS16 2JP, UK, peter.wardley@uwe.ac.uk
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Extract

This article looks at the experience of management of technological innovation and mechanisation by British financial institutions. It highlights the indigenous assessment of technology, reflecting on local and American influences in two types of business organisations within the financial sector to demonstrate the nature of responses and the timing of the introduction of new methods and machinery. The adoption of Information Technology (IT) and computer applications in particular play a crucial role, though one that is intimately connected with a strategic expansion of corporate business, this growth being reflected in terms of size of business and also territorial expansion, as each of the institutions considered here constructed a national network of retail branch outlets. Discussion of established literature for the high street banks is combined with archivally informed analysis of similar, but previously undocumented, developments on the part of building societies. By taking a long-term view of these developments in the twentieth century, and by comparing the experiences of two different sets of institutions, the article highlights the strategic factors that influenced the decisions taken by senior managers in their transformation of British retail financial services.

Type
Research Article
Information
Financial History Review , Volume 14 , Issue 2 , October 2007 , pp. 177 - 205
Copyright
Copyright © European Association for Banking and Financial History 2007

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References

1 This article was originally circulated as ‘Not another story of British backwardness? Information systems and technologies in UK high street banking, 1919–1979’. Helpful comments from an anonymous referee, Trevor Boyns and critical participants at the conferences of the Society for the History of Technology (SHOT), Amsterdam 2004 and 11th Journées d'historie de la comptabilité, Bordeaux, 2005 are gratefully acknowledged.

2 In the 1980s the British high street banks, which provided retail financial services, were faced for the first time with direct competition (outside the mortgage markets) from building societies, which previously had functioned mainly as home-loan or thrift institutions. Building societies were founded as mutual organisations, though in the late 1990s some were transformed into shareholder-owned companies. By the end of the twentieth century, the two institutions had converged to a rather similar organisational structure that provided very similar services.

3 Insurance companies, savings banks, some investment banks, Post Office banks and hire purchase organisations were among those intermediaries that, by the end of the twentieth century, had also converged into US and UK retail bank markets. The history of their automation is not fully documented though notable exceptions include Bátiz-Lazo, Bernardo and Maixé-Altes, J. Carles, ‘The computerisation of British and Spanish savings banks, 1960–2000’ (paper presented at the 10th Annual European Business History Association, Copenhagen, 2006)Google Scholar; Campbell-Kelly, M., ‘Large-scale data processing in the Prudential, 1850–1930’, Accounting, Business and Financial History, 2. 2 (1992), pp. 117–39CrossRefGoogle Scholar; Campbell-Kelly, Martin, ‘Data processing and technological change: the Post Office Savings Bank, 1861–1930’, Technology & Culture, 39. 1 (1998), pp. 1–32CrossRefGoogle Scholar; Cortada, James W., The Digital Hand, vol. 2 (New York, 2006)Google Scholar; Yates, JoAnne, ‘The structuring of early computer use in life insurance’, Journal of Design History, 12. 1 (1999), pp. 5–24CrossRefGoogle Scholar.

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16 Ibid.

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20 We appreciate Ian Ormerod alerting us to: Anonymous (P.W.F.), ‘End of an era’, NCR Post Monthly, circa May 1956. In an example of technological ‘lock in’, NCR manufactured the last of the Series 3000 shortly after.

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30 Wardley, ‘The commercial banking industry’.

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33 Ibid., p. 11.

34 McKenney, James L. and Fisher, Amy Weaver, ‘Manufacturing the ERMA banking system: lessons from history’, IEEE Annals of the History of Computing, 15. 4 (1993), pp. 7–26CrossRefGoogle Scholar; Yavitz, Automation.

35 Yavitz, Automation.

36 Bátiz-Lazo, B., ‘Emergence and evolution of ATM networks in the UK’, paper presented at the Business History Conference, Cleveland, OH, 2007Google Scholar.

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38 BoEA, Audit Department Files [hence forth ADF]: The Audit Department's Approach to Computers (12 July 1967) (5A199/5).

39 BoEA, ADF: Magnetic Tape Registry (31 March 1967) (5A199/5). See also Institute of Chartered Accountants of England and Wales, An Audits Approach to Computers (London, 1966).

40 BoEA, ADF: letter from J. P. Jensen to E. de M. Rudolf (28 April 1967) (5A199/5).

41 BoEA, ADF: letter from J. P. Jensen to E. de M. Rudolf (10 May 1967) (5A199/5).

42 Within three years of its creation in 1913 the Federal Reserve Bank of New York opened an account with the Bank of England; is not clear whether regular weekly correspondence started then, in 1916, or in 1926 (BoEA, FRBNY Weekly Letters, C9).

43 Anonymous, , ‘The computer – and the story behind it’, Midland Bank Staff Magazine, January (1963), pp. 432–3Google Scholar.

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45 Channon, British Banking Strategy and the International Challenge.

46 Saville, R., Bank of Scotland: a History (1695–1995) (Edinburgh, 1996)Google Scholar.

47 Woolwich Equitable Building Society [henceforth WEBS], ‘Brief Report on Automation’ [henceford BRA], Barclays Group Archives, Manchester, 4 April 1960, Ref. 144.

48 The B.101 Sorter-Reader was a high-speed digital sorter, primarily intended to be used by banks for sorting cheques and credit slips into branch and account number before posting. It read magnetised figures and sorted documents at approximately 1500 a minute, into 13 sections – 10 for the main digital sort, 2 for special items, 1 for rejects.

49 Campbell-Kelly, Martin, ICL – A Business & Technical History (Oxford, 1989)Google Scholar.

50 Ibid.

51 Edwards, R. S. and Townsend, H., Business Enterprise: Its Growth and Organisation (London, 1958)Google Scholar.

52 WEBS, BRA, 4 Apr. 1960, Ref. 144. See also Hendry, J., ‘The teashop computer manufacturer: J. Lyons, LEO and the potential and limits of high-tech diversification’, Business History, 29. 1 (1987), pp. 73–102CrossRefGoogle Scholar, which adds a cryptic reference, apparently to Fisher, F. M., McKie, J. W. and Mancke, R. B., IBM and the US Data Processing Industry: an Economic History (New York, 1983)Google Scholar.

53 The Chairman of the Woolwich was also Chairman of STC and, not surprisingly, pushed the former to link up with STC but, in the end, the Woolwich's Accountant and STC's engineers recommended against it.

54 Wilson, John F., ‘International business strategies at Ferranti, 1907–75: direction management and performance’, Business History, 40. 1 (1998), pp. 100–21CrossRefGoogle Scholar.

55 Ackrill and Hannah, Barclays.

56 http://www.royalbankscot.co.uk/Group_Information/Memory_Bank/Our_History/Group_Constituent_Histories/coutts.htm date accessed 1 March 2003.

57 Bátiz-Lazo, ‘Depreciation of buildings in mutual financial services, circa 1959’.

58 WEBS, Electronic Accounting [henceforth EA]; Ref 1 The use of electronic and punched card accounting equipment by building societies, c.1957.

59 WEBS, Visit to the Alliance Building Society's Punch Card Accounting Installation [Visit to the Alliance]: Ref 1: Practical points applicable to any punched card system, 5 April 1957.

60 WEBS, Visit to the Alliance, Ref 2: The change-over from Burroughs and benefits.

61 WEBS, Visit to the Alliance, Ref 2: The change-over from Burroughs and benefits.

62 Anonymous, , Computer Systems and Services (1979, Halifax)Google Scholar.

63 WEBS, EA, Ref 1: The use of electronic and punched card accounting equipment by building societies.

64 Anonymous, ‘The computer – and the story behind it’.

65 Co-operative Permanent Building Society [henceforth CPBS], Board Minutes, Nationwide Society Archives, Nationwide Building Society, Wellingborough, 25 June 1959 (Ref Accounting Machines).

66 Interestingly, a more advanced model of the same Burroughs accounting machine was still hailed as innovative in 1963. Ralph Stow, General Manager of the Cheltenham and Gloucester, claimed that two Burroughs Sensitronic F4200 machines sufficed to handle the daily postings of this medium size society (some 33,000 mortgage ledger accounts). This at a time when mechanical ledger posting was widely used by many other medium and small sized societies. See Stow, Ralph, ‘A venture into electronic accounting’, Building Societies' Gazette, (1963), pp. 214–15Google Scholar.

67 Unless otherwise stated, data in this paragraph borrow freely from Anonymous, Computer systems and services, p. 2.

68 WEBS, EA, Ref 2: Reasons for the use of punched cards in conjunction with electronic means of accounting.

69 Hendry, ‘J. Lyons’.

70 Yavitz, Automation.

71 WEBS, EA, Ref 2: Reasons for the use of punched cards in conjunction with electronic means of accounting.

72 WEBS, Data Relevant to Utilisation of Electronic Equipment [henceforth DRUEE], Ref 3: Sources of Entry, 28 Jan. 1960.

73 WEBS, DRUEE, Ref 3: Sources of Entry.

74 Yavitz, Automation.

75 Ibid.

76 Schofield, A., ‘The electronic revolution’, The Building Societies' Gazette (1963), pp. 50–1Google Scholar.

77 CPBS, Special Policy Board Meeting: Electronic Data Processing, Ref. 296.e Economics of E.D.P., 16 April 1964.

78 WEBS, The Effect of a Computer, Ref. Chief Office, 13 March 1964.

79 Schofield, ‘The electronic revolution’.

80 Revell, J. R. S., Banking and Electronic Fund Transfers (Paris, 1983), pp. 67Google Scholar, documents estimates of human tellers displaced by automated teller machines circa 1980.

81 The Woolwich estimated that in November/December of 1959, 1/3 of borrowers used bank orders and 1/6 credit transfers to pay their subscriptions. As a result half the number of payments accrued to bank-based transactions. The other half comprised transactions at retail counters or by post (1/3) and through agents (1/6). WEBS, The Effect of a Computer, Ref. Borrowers, 13 March 1964.

82 Roberts, John, The Modern Firm (Oxford, 2004)Google Scholar. On investments in computers and complementary assets see Brynjolfsson, Erik and Hitt, Lorin M., ‘Beyond computation: information technology, organizational transformation and business performance’, Journal of Economic Perspectives, 14. 4 (2000), pp. 23–48CrossRefGoogle Scholar.

83 CPBS, Special Policy Board Meeting: Electronic Data Processing, Ref. 296.b Centralisation of Accounts – Service to Members, 16 April 1964.

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85 CPBS, Special Policy Board Meeting: Electronic Data Processing, 16 April 1964.

86 Robb, Fenton F., ‘Information technology and the accounting profession’, in Lee, T. A., Bishop, A. and Parker, R. H. (eds.), Accounting History from the Renaissance to the Present (New York and London, 1996)Google Scholar noted that mechanisation made it increasingly necessary to program work in an office as if for a production line. ‘Due to the skills and knowledge required, there were not many people who could do more than a few of these jobs’ (p. 204). However, contrary to evidence presented in this section, he claimed that ‘most accountants and auditors preferred not to get involved in what was patently electro-mechanical engineering. These professionals tended to treat the whole computing function, from data preparation to printing, as just a huge black box’ (p. 211).

87 CPBS, Minutes of the Board, Ref: Computer Manager, 7 May 1964.

88 Yavitz, Automation, p. 33.

89 Saville, Bank of Scotland: a History (1695–1995), pp. 689–92.

90 Although the nature of their contents is known, these reports remain closed to the external user because they contained confidential financial data and commercially sensitive observations. This paragraph is also informed by private correspondence with H. Redmon-Cooper, Archivist HBOS Group (27 Jan. 2003).

91 See comment on surviving elements of this report in Bátiz-Lazo and Billings, ‘In search of a winning strategy’.

92 Ritchie, the Woolwich. 91 and WEBS, Minutes of the Meeting of the Finance Committee, Ref. Item 3, 17 June 1965

93 Martin, P. W., History of the Heart of England Building Society (Warwick, 1981), p. 167Google Scholar.

94 Redden, Britannia, p. 86.

95 Ibid., p. 86.

96 Ibid., p. 96.