* Microsoft withdraws support for Windows XP on April 8
* U.S., UK major banks negotiate fees for extended support
* 95 percent of world's 2.2 million ATMs run on outdated XP
* One-third of ATMs have been upgraded to Windows 7
* Cost of upgrade for each UK bank around $100 million -
By Matt Scuffham and David Henry
LONDON/NEW YORK, March 14 Banks around the
world, consumed with meeting more stringent capital regulations,
will miss a deadline to upgrade outdated software for automated
teller machines (ATMs) and face additional costs to Microsoft
to keep them secure.
The U.S. software company first warned that it was planning
to end support for Windows XP in 2007, but only one-third of the
world's 2.2 million ATMs which use the system will have been
upgraded to a new platform, such as Windows 7 by the April
deadline, according to NCR, one of the biggest ATM makers.
To ensure the machines are protected against viruses and
hackers many banks have agreed deals with Microsoft to continue
supporting their ATMs until they are upgraded, extra costs and
negotiations that were avoidable but are now likely to be a
distraction for bank executives.
"There are certainly large enterprise customers who haven't
finished their migrations yet and are purchasing custom
support," a spokesman for Microsoft said, declining to name
those customers or to quantify the extra revenue it is earning.
"The cost will depend on both the specific needs of the
customer and what support they already have in place, so it's
different for every customer."
Britain's five biggest banks - Lloyds Banking Group
, Royal Bank of Scotland, HSBC, Barclays and
Santander UK - either have, or are in the process of
negotiating, extended support contracts with Microsoft.
The cost of extending support and upgrading to a new
platform for each of Britain's main banks would be in the region
of 50 to 60 million pounds ($100 million), according to
London-based Sridhar Athreya, principle at financial technology
advisers SunGard Consulting Services - an estimate corroborated
by a source at one of the banks.
Athreya said banks have left it late to upgrade systems
after being overwhelmed by new regulatory demands in the wake of
the 2007-08 financial crisis.
"They were probably not very serious about the directive
that came in from Microsoft. There's a lot of change going on at
these banks at this moment in time and they would have seen
Windows XP as one more change," he said.
Windows XP currently supports around 95 percent of the
About 440,000 - or one-fifth of the world's ATMs - are
located in the United States and many of the banks operating
them will still be running their ATMs with Windows XP for a
while after the April 8 deadline, said Doug Johnson, vice
president for risk management policy at the American Bankers
"One thing in our favour is that XP is battle-hardened,"
Johnson said. "People will benefit from years of fine-tuning of
XP...It has been through wars."
STAND IN LINE
The queue of banks waiting to upgrade means there aren't
enough people to do the work.
"There is a little bit of a bottle-neck," said Johnson.
Some banks are using the upgrade as an opportunity to
introduce new features to their ATMs such as being able to read
cards that have microchips rather than magnetic stripes.
Banks in the United States, where the old-fashioned swipe
and sign magnetic stripe credit cards are still in use, have to
upgrade their ATMs to read chip cards.
JPMorgan, which has 19,200 ATMs, will start converting its
machines to Windows 7 in July, with a goal of finishing by the
end of the year. With the change, JPMorgan expects to improve
data encryption and ensure machines take software upgrades more
efficiently and be offline for less time.
A spokeswoman for the bank declined to say how much JPMorgan
is paying Microsoft for the extended XP coverage.
Bank of America also said it would ask Microsoft to extend
support for its machines still running on Windows XP.
Citigroup Inc, which has more than 12,000 ATMs
worldwide, said it is in the process of upgrading its machines
from XP and declined to give further details.
In Britain, RBS, which has been hit by a succession of IT
problems, has agreed a fee with Microsoft in return for it
continuing to support its 9,000 ATMs for up to three years, a
source familiar with the arrangement told Reuters.
RBS will begin upgrading its ATMs to run on Windows 7 next
year and expects to complete the process within three years, the
source said. The investment is part of the 1.4 billion pounds
each year which new Chief Executive Ross McEwan has committed in
order to improve the bank's computer systems.
McEwan admitted in December that RBS had neglected its
technology for decades.
Lloyds said it had agreed to pay Microsoft an undisclosed
amount to extend support until 2016 while it upgrades its 7,000
ATMs. The bank will start upgrading its ATMs later this year.
HSBC, which has 3,200 ATMs, said it was two years into a
three-year programme of upgrades which it expects to complete
next year. It had also reached a deal with Microsoft.
Barclays, which has 4,300 ATMs, said it was still
negotiating with Microsoft while Santander UK, which has 2,370
ATMs, said it had already agreed a deal.