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Like
science fiction – only BETTER…
“The
banks have declared already that no redundancy of staff is expected from
the introduction of computers”.
1959 – The future has arrived, and the clock innocently
begins the countdown to a world without the need for Branch Banking…
Image © Martins Bank Archive Collections
Testing Times…
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 The British computer firm
Ferranti is chosen by Martins after successful demonstration of their
Pegasus I computer. Programs are
written and re-written, Pegasus II is born, and ordered for use by
Martins. There follows the birth
of the automation of branch accounting, travellers’ cheques, customer
stationery, the notion of a computer terminal in every branch, AND the
birth of the cash machine – In fact Martins unveils the World’s first
cash dispenser to use a plastic
card with a Personal Identification Number in the Autumn of 1967.
Following the success of the London pilot, a
Pegasus II computer is installed at Liverpool Head Office in 1962, not
before strike action at companies connected with Ferranti causes some
delay to the project.
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WHY NOT ALSO VISIT THESE PAGES
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Martins Bank’s programme of automation is quite
ambitious for a bank of its size, with plans to connect every branch to the
computer centre by phone line to enable the daily submission of work
recorded by each branch onto punched paper tape and fed through
transmission equipment. That these
plans never reach fruition is due in part to the merger, but mainly to
Martins’ choice of computer equipment and its limitations as we shall see
below.
How it all begins…
The following feature entitled “ENTER PEGASUS” appears in Martins Bank
Magazine in the Spring of 1960, and gives the official version of the
Bank’s decision to move into computers.
 Our bank is the first
bank in this country to use an electronic computer for the complete current
account book-keeping operation including the production of statements for
customers. Here is the Pegasus computer manufactured by Ferranti Ltd. which
was used for our experiment. Pegasus II can deal with 30,000 accounts in five hours
with no more than five people in attendance.
 A room approximately 30
x 20 feet would
offer ample accommodation for the units shown here. The actual computer is in the foreground
on the left and there are four magnetic tape units, two of which face the
camera immediately adjoining the actual computer. At the rear can be seen
the power cubicle in front of which are the two other magnetic tape units.
On their immediate right is the high speed punch, and adjoining it on the
far right is the magnetic tape control unit. The introduction of electronic
techniques into banking routine has been talked about for some time but to
the majority of members of the staff no doubt this has been a prospect of
the distant future likely to affect the next generation of bank staff
rather than the present.
 The announcement that
the Bank has ordered a computer and that delivery is expected no more than
twelve months hence may have come as a rude shock to some who have prayed
that it would not come in their time.
Computers were heralded by the popular press a decade ago as the
electronic brains that would revolutionise life in the future. This is the
kind of sensationalism on which newspapers thrive but the devices of that
time were not quite so clever as such accounts would have had readers
believe. They were certainly of little use to commercial enterprises and
the Bank's interest was merely academic. By 1955 it became clear that
electronic developments applicable to commercial projects and particularly
to banking were on the way and during that year the London Clearing Banks
set up an Electronics Sub-Committee. Our earlier interest permitted Martins
Bank to play its part in this inter-bank Committee from the beginning,
providing a member of the Working Party of three. The Committee and Working Party are still
hard at work and our independent work is not in any way in conflict with
the joint research; indeed one is complementary to the other.
 For the next year
or two our efforts were almost completely identified with the inter-bank
effort but subsequently more and more attention was paid to the Bank's own
needs. Only in very broad principle is the inter-bank Committee interested
in accounting procedures and it was quite clear that it would be left to
individual banks to develop the details of their own systems. Consequently
the Bank opened discussions with all major computer manufacturers and this
culminated in the development of what was called the First Assessment of
Computer Specification for Martins Bank Limited which was distributed to
interested manufacturers in March, 1958, along with specimen data relating
to a group of branches. On this basis " Feasibility Studies "
were carried out, our own research staff co-operating extensively with the
staffs of manufacturers. Visits to the U.S.A. and European countries
provided extensive and valuable experiences to support this effort. By
September 1958 the first Feasibility Study was complete and many more
followed in the ensuing six months. Amongst these was the study produced by
Ferranti jointly with our own staff based on the Pegasus computer and this
appeared to stand out as the one most likely to satisfy the Bank's needs.
 A feasibility study
is no more than its name implies. It is a study of the specification of a computer
in relation to the task to be set, involving an estimate of the speed of
operation that can be expected on such a task, the capacity of the
equipment in terms of the amount of work that it can cope with and the
probable economies of operation. A computer is not a fixed unit as is the
case with an accounting machine; it is an assembly of component parts with
almost unlimited permutations and combinations. The feasibility study aims amongst other
things at assessing which particular units should be adopted for a given
purpose. This stage of theoretical study is essential because one cannot
buy a computer just to try out as one might an accounting machine. Many potential users will buy a computer
on the basis of a feasibility study but this can be a risky procedure as
many have found to their cost. Instead of taking such a step the Bank
decided that the ideas and systems evolved during the study phase should be
tested out by practical experiment and in April 1959 authority was given
for an exercise involving one of our branches aimed at carrying out the
whole of the current account operation by electronics in parallel with
normal operating of the branch accounts by conventional methods. A computer requires a programme of
detailed instructions on which it is to act.
 There is no single
correct programme to be produced with mathematical accuracy. On the
contrary, there is a variety of logical approaches to the programme and
different programmers may produce quite different end products which
nevertheless lead to the same ultimate result. There is scope for
individuality. A good programmer is at least equal in importance to a good
computer. Quite commonly up to two man-years is spent in studying an
operation and programming it for a computer. The Bank, fortunately, could call
on a good programming team provided jointly from our own staff and Ferranti
and the work was completed by the end of the year after only eight months'
work. This was in fact the target that had been set when the exercise was
begun. The resultant programme proved to be very successful. Computer time
was booked at intervals to test parts of the programme as they were
completed and the process commonly known as "de-bugging"—the elimination of flaws in the elaborate logical structure
of the programme— went through smoothly and quickly. This is the hallmark
of good programmers. Finally the whole process was strung together into one
complete programme and was then ready for practical testing.
Meanwhile the branch end of the
operation had to be prepared. South Audley Street branch was chosen because
it is near to Portland Place where the computer used for the experiment is
situated and because the research staff were housed in that branch. The
branch is not so large as to be unwieldy but nevertheless provided a
reasonable sample of current account business.
 The first step was
to give numbers to accounts. This is no simple process. Each number has to
be computed so that it is self-checking and for this purpose the computer
itself was used. Numbers have to be allocated so that accounts are
substantially in alphabetical and also in numerical order, leaving gaps for
new accounts. Then the co-operation of customers was sought because these
numbers had to be printed on all cheques before issue to the customer. A
machine was provided to imprint each cheque, with the name and number of
the account-holder. This operation of personalisation was carried out each
time a cheque book was requested and customers helped by bringing in their
partly used cheque books for personalisation. The medium used to feed data
into the computer is punched paper tape. An adding machine had to be
provided at the branch to produce this tape simultaneously with a normal
adding operation.
 The first machine tried was not very satisfactory for our
purposes but we were able to persuade Addo, a Swedish firm, to hasten through their workshops a
prototype of a new model not yet in production and this was used for the
exercise. Each day the work of the branch, after passing through the normal
waste process, was handled a second time by an operator on the Addo machine to produce the
necessary tape and also a print on an ordinary waste sheet. In January we were all ready and for the
first time in this country the current account work of a branch was
operated day by day on an electronic computer. It was on the basis of this
exercise that an order has now been placed for our own computer. The
exercise will not end with the operation of current accounts on the new
equipment. Already other aspects of the Bank's routine are under
consideration for application to the computer. This is the beginning of a
new and exciting era in the development of bank methods. The Bank has
clearly indicated that, far from lagging behind, it intends to point the
way. The exercise has served its purpose and has been closed down. Now we
are faced with a year of intense activity in preparation for our own
computer.
The Bank’s “Brave New World” introduction to Pegasus certainly gives
the idea that exhaustive testing makes a computer operation foolproof, and
the various stages of recording the data should be smooth running and
simple to achieve. Here comes the “BUT” - As we have already mentioned in
our MARTINS’ FIRSTS section, the race to be first with computers begins when
another bank opens a drive through branch right under Martins’ nose in
Liverpool. Ferranti sell Pegasus as a general purpose computer, and it is
already in use at I C I in Manchester a year or two before Martins order
one of their own. We are immensely
grateful to our colleague Peter Hayes, who actually worked with the data
collection for Pegasus at our Liverpool Heywoods Branch in the early 1960s,
for the following recollections. As
you will see, it certainly was not “plain sailing” and Peter’s story
also gives us what might be another, albeit undesireable first for Martins – “Rubbish in, rubbish out”….
The mysterious case of HMS Ark Royal, the sweet shop, and
“Pegasus finger”…
 “I
had a lot to do with the Pegasus Mark 2 which I had to make work whilst at
Heywoods branch but it never did work properly. My recollection of the
computer is of two accounts. A Shipbuilders (who at the time were laying
down the keel of the Ark Royal) and a sweet and tobacco shop owner. The account numbers had to be preceded by
a large number of zeros, as at this time there was no zero suppression and
ALL leading zeros had to be entered for the computer to be able to
accurately record the transaction against the correct account. So the young
girls who each day produced the punched paper tape for inputting into
Pegasus had to type all these noughts followed by a seven digit account
number for each cheque or credit.
The shipbuilding company would
have say fifty cheques a day going out of their account and the sweet shop
owner perhaps one or two per week.
By the time the girls had punched in the shipbuilders’ account
number fifty or so times, they had developed what Ferranti called a
"finger pattern" so when the next cheque for the sweet shop
turned up with just one digit difference they would invariably punched in
the shipbuilders’ account number and the shirt purchased at M&S by the
sweet shop owner for £2.10.0 was debited to the shipbuilder. There was also
another customer whose account suffered this finger problem as a result of
which about £1m for the steel for the Ark Royal's keel was debited to his
account and he came in sweating profusely as his overdraft limit was
exceeded. The best bit was the
terminology we used. The date when someone wanted a statement was known as
the "statement periodicity date".
An 18 year old cashier at Heywoods was approached by a woman of a
certain age and asked for a statement of her account. He responded with
"When is your periodicity date?" and was clouted round the ear by
an umbrella! The account was also closed forthwith”…
In Spring
1961, R Hindle Manager (Organisation Research and Development) writes a
detailed report for Martins Bank Magazine to show staff what Pegasus could
do, and why the whole project is necessary. It is fascinating to note from
the first few lines of Mr Hindle’s article, that he seems to be advocating
the installation of computers as a more reliable replacement for WOMEN, as
computers are not likely to want to work for only a few years before
leaving to get married!
You and Pegasus
 Many members of the staff,
their daily work flowing easily and smoothly, must query the reason for
radical change in the Bank's methods, whilst those who are labouring under
an apparent overload of work resulting in long hours generally see as the
logical solution to their problem an increase in staff rather than a change
in system. The fact is that, in
banking, profits are made from the holding of monetary balances and not
from movements of money from place to place, but it is the movement of money
that gives rise to the continually increasing load of routine work which
engages the greater part of the Bank staff's man hours. To recruit staff in
proportion to the increase in routine work would be to reduce the chances
of a satisfactory career to those incoming members of the staff and this is
not likely to encourage satisfactory recruiting. More purely routine staff
who would have no expectation of a successful career could be employed—and
of course generally these are girls the majority of whom simply want
employment for a few years until they leave to be married—but there is
considerable competition for the services of available people in this
category in many areas and organisations depending on large numbers of them
can find themselves in a very precarious position.
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x
The start of something big often
means a grand entrance, and equipment that is designed to control in
excess of 30,000 current accounts requires a special room of its own,
Liverpool Computer Centre at Derby House, close to Martins’ Water Street
Head Office.
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Just like moving a piano: Every care is taken to ensure
that each piece of the delicate and futuristic technology is handled with
care and great skill by those who operate the crane and other lifting
equipment.
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Mechanisation
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In 1932 conventional mechanisation was
just beginning to spread and consequently forms an interesting basic year
for comparison purposes. Since then postings to customers' accounts have
increased by 160%. The increase up to 1947,
just after the war, was only 50%. Note that these figures represent
the increase in numbers of postings, not of the sterling value of the
entries. So it appears that since the end of the war the Bank has added to
its routine load more than its total commitments in 1932.
There is no reason to think that this expansion
of normal banking services is at an end. Indeed, new factors are appearing
which are likely to increase the expansion rate. For instance, the credit
transfer development has just been extended to include "third
party" credits and one estimate puts the figure for credit transfers
likely to be handled by the clearings in a few years' time at 400 million
per year. This compares with the present cheque load of around 900 million
per year. The possibility of extension of the principle of paying wages by
credit into a banking account will bring more people into the banking
circle.
Mechanisation has helped the Bank to
cope with increases and conventional mechanisation continues to be
extended. The effect of mechanisation has been twofold. Firstly, it has
introduced to the Bank a section of staff with a high natural wastage rate,
members who are not likely to compete for the more responsible jobs.
Secondly, it has increased the capacity per member of staff to deal with
routine work so that numbers of staff do not have to increase in proportion
to work increase.
Fitted and working, Pegasus II takes on the work that until
that point had cost hundreds of man hours in manual procedure.
Use Of Computer
x
A computer has quite a different
effect. It is not merely an aid to production, a tool in the hands of a human
being: it can take over from human beings complete routine tasks and
requires only a very modest degree of human supervision. Before it can
start on such a task, however, it must be provided with human guidance in
intricate detail. Such guidance is called a programme and as a result of
the need to produce such programmes important and responsible new posts are
created. First, "Systems Analysts" study the purpose of the
operations to be carried out in great detail and decide how best the computer
can tackle the job. They build into their system techniques which were
quite impracticable by conventional methods but which will be of great
assistance in managing the affairs of the Bank. The shorthand of the
Systems Analysts' trade is the flow chart which represents their thoughts
in pictorial form. The flow charts then pass to the Programmer or coder,
who reduces the charts to apparently meaningless lists of numerals which
represent, in fact, the way in which instructions can be given to the
computer. The people who are performing these new duties are all drawn from
the ranks of our own staff. A new department has been set up to deal with
"Organisation, Research and Development," including the task of
programming the computer, but the purpose of this Department is not solely
related to electronics. Its personnel must approach each problem with an
open mind, and must weigh up the virtues of different methods, electronic
and otherwise, before deciding how a job should be tackled.
Progress Report
x
And now a progress report on the
exercise to introduce Pegasus. Premises
adjacent to our Head Office building in Liverpool have been obtained and
have been modified for this purpose. The computer is expected to be
installed and commissioned by the time this Magazine appears. A complete
current account programme was written by our staff in co-operation with
Ferranti, the manufacturers, during 1959. The task took nine months and in
January, 1960 was given an exhaustive test. Our South Audley Street branch
proved to be a very willing guinea pig; their accounts were applied to the
computer and each day the branch produced a punched paper tape bearing
details of entries passing through their books. The exercise was then
closed down and the programme has since been completely re-written in the
light of the experiences during the exercise. A larger team has spent ten
months on the re-writing of the programme though this period includes the
training of new members of the team. There is no one correct programme for
a computer operation; a programme is in fact a growing thing reflecting the
personalities of those working on it and it will continue to develop as
time goes on until optimum results are achieved. In the early stages the
programmers will operate the equipment, for they must ensure the successful
application of their work, but meanwhile a team of operators will be
trained to take over. The need for programmers will continue after
installation for re-programming work and also they will have to turn their
attention continually to new applications as the scope of the computer
extends, perhaps, to travellers' cheques reconciliations, to Trustee,
Registrar's, Overseas and other departmental accounting problems, and to a
whole range of statistical work. In the first place the computer will work
on current accounts, for which operation it has a capacity of 40/50,000
accounts. Clearly this requires the centralisation of the routine of a
number of branches and this involves problems of communication. The Bank
has experimented already with a system of data transmission over G.P.O.
telegraphic circuits and is now studying methods of higher speed
communication over the ordinary telephone line network. The first
objective, however, is to centralise branches in a compact area around the
location of the computer providing about half the total capacity of the
computer. Under these circumstances communication can be handled quite
satisfactorily by means of porters who can physically transport data
through the streets.
The Pegasus Programming Team
(Left to Right): KE Buxton, TA Bacon, PRF Jones, IEK Jones,
Miss M Owens,
Mrs R Leach (of Ferranti Ltd, London), D Bissett (of
Ferranti Ltd, London) K Whalley
(Chief Programmer in charge of the project) and Mr R Hindle.
What Pegasus Can Do
x
The computer will be programmed to deal
with all aspects of current account book-keeping, including:— (1) Posting of normal debit and credit entries, e.g.,
details from cheques, credit notes, etc. (2) Incorporation of corrections
to normal entries. (3) Alteration of account information. (4) Addition of
new accounts. (5) Removal of closed accounts. (6) Accumulation of
statistics for management information, interest charges, etc. (7) A check
of each debit entry against a list of stops. Any stop so found is rejected
by the computer. (8) Comparison of the closing balance of each individual
account or group of set-off accounts against overdraft limits. Any excess
of these limits causes control information to be printed out, drawing
attention to the excess. (9) Printing of customers' Statements. Most of
these are produced on a period basis agreed with the customer but provision
is made for Statements to be obtained outside this standard requirement by
special request. (10) The accumulation through the day of the following
branch statistics which will be printed out and returned to the branch—(a)
A daily list of balances, debit and credit, of all accounts, (b) A daily
audit sheet providing details of any items rejected by the computer,
balancing figures and any other item requiring further attention by the
branch.
Method
x
Two main files, called the Balance and
History Files, form the basis of the system. Both files are stored on
magnetic tape in account number order and contain the following information
in respect of each account:—
x
(1) Balance
File
(a) Account
number;
(b) name;
(c) balance;
(d) report
limit;
(e) overdraft
limit;
(f) details
of stopped cheques;
(g) accumulated
statistics for management Information and the computation of charges.
(2) History
File
(a) Account
number;
(b) name;
(c)
periodicity of statement issue;
(d) amount of
balance and date from last statement;
(e) date,
description and amount of each posting awaiting print out on the next
statement.
Both these files need to be updated
each day in respect of the vouchers passing through the branch and it is
therefore necessary to transcribe the relevant details from the vouchers on
to a suitable medium for the computer. Paper tape is used for this input
medium.
Preparing for Pegasus
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Preparations have already been made at
one Liverpool branch, and others are following. This involves the numbering
of accounts for purposes of internal identity. Cheques are already being
"personalised," i.e., printed with account name and number,
before books are issued to customers.
The traditional ledger posting machine
has a threefold purpose, i.e., (1) Arithmetic processes have to be carried
out to produce new balances and adjust statistics. (2) Historic purposes
require the assembly of entries in chronological order. (3) A visible
record of (1) and (2) has to be produced.
A fourth process, the production of
statements, exists in conventional systems generally as a separate
operation but the three purposes above are combined in a single process.
For electronic operation, however, the above three purposes are dealt with
in separate processes.
The complete daily sequence of events
is as follows: - All vouchers
entering the branch must pass through one of two listing operations - the In-clearing or the Waste. By adding a
paper tape punch to a conventional adding machine the paper tape input for
the computer is being prepared as a direct by-product of the normal listing
function with little additional effort. Details (account number, simple
description and amount) from each voucher relating to an account in the
branch, are keyed into the machine and, on depression of the motor bar, are
printed on the machine list and simultaneously punched on to paper tape.
At intervals check totals are punched into the tape. These check totals are
used by the operator to check her entries on the machine and also by the
computer for checking the data on input.
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