Software spec slip denies Westpac chance at a MILLION A DAY
That's not a bug, it's a feature
Some of Australia's major banks' databases don't distinguish between loans to housing investors and owner-occupiers, meaning they're missing out on the chance to charge differential interest rates.
Along the way, they're providing an object lesson to businesses that depend on IT: if you don't ask for a capability, you won't get it.
In what Fairfax newspapers are calling a "glitch," what's biting Westpac and National Australia Bank (NAB), albeit in different ways, is that their documentation doesn't capture the purpose for a loan, which means their databases and applications similarly don't make a distinction.
That omission is biting both, as Australia's financial regulator, the Australian Prudential Regulation Authority, is making it known it wants lenders to take care with housing loans lest Australia's investor-led residential property boom become a bubble. Banks that can tell the difference have therefore started applying slightly higher home-loan interest rates to investors, in part to weed out those who might be scared off by higher repayments on the basis that such folk may be more susceptible to the bubble bursting and/or to gently discourage some new investors.
NAB, reports the Sydney Morning Herald, decided to put 0.29 per cent extra on all interest-only loans, while Westpac is reportedly struggling to work out what to do.
Even a cursory reading of that piece demonstrates one of the oldest dictums in software engineering: the most expensive mistakes in software are in the requirements document.
Westpac's and NAB's systems are doing exactly what's asked of them, but the business side didn't stipulate that the systems should differentiate between home-owners and property investors.
The cost of a mistake in the spec? Fairfax claims that Westpac is missing out on AU$1 million a day.
It's perhaps relevant that in 2011, Westpac decided that the role of CIO wasn't worth having, and rolled up the position into something called "group operations."
A quick perusal of the company's senior management reveals the idea didn't last long, however, and the C is back in front of the IO. ®