The story of a rivalry, drive-in-banking, a computer called Pegasus and a team with great vision. Martin Cooper MBCS explores the history of Martins Bank and its desire to be first at 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.’ So trumpeted the staff magazine of Martins Bank from spring 1960. The machine in question was a Pegasus II computer, built by Ferranti Limited (number 35 of the 40 Pegasus I and II machines that were sold).
In all, the Pegasus II - a collection of hulking cabinets, power cubicles, card punches and tape units - needed a room 10x7m in which to work. Proudly, Martins’ magazine asserted: ‘Pegasus II can deal with 30,000 accounts in five hours with no more than five people in attendance.’
Today, of course, the name Martins Bank is all but lost. In 1968, it was subsumed, along with its 730 branches, into Barclays in a move necessitated, in some ways, by the costs associated with computerisation but also the banking industry’s rapid growth and change.
The road and flight to computerisation
By the late 1950s, Martins Bank had grown to be something of a northern banking powerhouse. Indeed, it was the largest British clearing bank not to have its headquarters in London. Rather, Martins’ seat of power was Liverpool, where it occupied a grand building in the classical revival style at 4 Water Street.
Summing up Martins’ golden years, Jonathan Snowden, Editor at www.martinsbank.co.uk, says: ‘They, installed the first cash machine in the UK that worked with a plastic card and pin, and pioneered bilingual cheques for Welsh customers… Martins had the accounts of the Cunard Shipping Line and Littlewoods Pools, they were bankers to Sooty and Sweep (or at least to Harry Corbett), British Eagle Airways and Silver Cross Prams. For one of the “small six” to do all this and remain in Liverpool [was noteworthy].’
Those golden days were, however, besmirched on Thursday 29 January 1959. In the heart of Liverpool - Martins’ city - rivals Westminster Bank had the audacity to open its first drive through bank. Snowden explains that the Martins board were collectively livid. ‘There was an atmosphere of anger and disbelief that the Westminster Bank could have done such a thing,’ he says.
Westminster’s move was unwelcome because Martins was planning to open its own drive-in branch in early 1959 too.
Martins was, Snowden explains, humbled by Westminster. To rub salt in the wound, Westminster took out triumphant adverts in the national press. And with a storm in the air, Martins’ board demanded that it should have its own ‘first’.
‘Those in charge at Martins were beside themselves with rage,’ he says, ‘and determined, not only to open a better [drive-in], but to immediately be first in banking to introduce something else - in fact anything else, it doesn’t really matter what. A board meeting was held and someone suggested computers.’
Seeds already sown and germinating
Though a great story, Westminster’s audacity didn’t catalyse Martins into beginning research into mechanising and computerising its activities. Rather, it seems, the move motivated the bank to turn its research into action more quickly.
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For some years, Ron Hindle, Martins’ Manager of Organisation Research and Development, had been researching automation and computers. Later in life, Hindle chaired a government committee tasked with bringing decimal currency to the UK. As such, he was ideally equipped with sufficient vision and inquisitiveness to bring computers to Martins.
A man of action, Hindle travelled America extensively in his missions to understand, learn and eventually buy a computer. Snowden continues: ‘The complexities of processing the daily work of branches cannot be underestimated and it was therefore very important that the right choice of machine was made, as the bank would have to commit very large sums of money to modernising its practices.’
Ideas into action
‘From the huge number of cuttings and reports in his personal archive, and the articles he wrote for the Martins Bank staff, Hindle was fascinated by the breaking down of tasks into a form that computers would cope with easily from the early 1950s,’ Snowden says. ‘The fact that he was allowed to travel the world looking at systems and seeking out the right equipment shows that he was backed by a large cheque book and a great degree of trust.’
At the heart of Hindle’s desire to explore computing was a hard banking-truth. In the Martins Bank magazine (spring 1961) he wrote: ‘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.’
Indeed, Martins was not alone in realising that banking’s inherent administrative overheads would soon make the business unprofitable if it were left solely to humans.
Elsewhere, as early as 1955, Martins was part of the London Clearing Banks Electronics Sub-Committee. As time moved on, however, Martins’ focus moved more towards understanding how computers could make its main business - current accounts - more efficient.
At the time, Hindle wrote: ‘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.’
Even with mechanisation and adding machines, contemporary banking processes couldn’t keep pace with banking’s development and booming scale.
The project begins
In April 1959, Martins made a decision: it would begin a practical test. It would choose a live and living branch, install a computer there and begin reproducing the bank’s day-to-day operations on the computer. The project’s aim was to reproduce the ‘whole of the current account operation by electronics in parallel with normal operating of the branch accounts by conventional methods.’
Along with allaying staff fears about redundancy, the Martins technical staff - through its magazine - endeavoured to explain the live experiment to workers. Delightfully, the spring 1961 magazine reads: ‘A computer... 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.’
The London test was a success. A complete current account management program was written by Martins staff and, in little over a year, the Martins Board decided to press on. A Pegasus II machine was ordered from Ferranti and delivered to premises next to the bank’s Liverpool HQ. During those twelve months, the original current program was completely re-written by Ferranti and Martins staff.
Pegasus flies
In the first instance, the Pegasus II was tasked with working on current accounts and it was reported that the machine had the capacity to manage between forty and fifty thousand of them. There were also plans to create a “high speed” communication system between branches which might work via the GPO’s telephone lines. Initially, however, it was felt that porters (staff) could physically transport data through the street.
Martins’ Pegasus II was programmed to deal with all aspects of current account book keeping, including: debits and credits; corrections; alterations to accounts; removal of closed accounts; gathering statistics for management; tracking balances and printing customer statements. Regarding accuracy, Martins said at the time: ‘There is no doubt that this book-keeping system has a far higher degree of safeguard against errors than any system that can be visualised using conventional equipment.’
Given all of this, Snowden explains that Hindle’s influence over the computerisation of banks is huge. ‘He is also more than responsible for the adoption throughout UK banking of magnetic ink character recognition (MICR) code encoding on cheques and other vouchers,’ he says. ‘This led the way to experiments with auto sorting machines and through the use of Pegasus II (and later NCR315) paving the way for Martins to develop of one of the best thought out Branch Accounting computer programs.’
The MICR system is still in use today. Look at the bottom of your cheque book at the very computer looking E13B typeface. After exhaustive shape analysis, in E13B, each number is designed to be as different as possible from the others to make recognition easier for machines. See MICR at www.martinsbank.co.uk.
Telling the end of the story, Jonathan says: ‘Having coupled the technology to reader-sorter machines, I believe Martins must have realised the limitations of the Ferranti options by about 1964. That’s when they set about establishing a large computer centre in London, using NCR technology and kit to develop branch accounting.’
Despite its investment in new technology, Martins could not expand quickly enough to compete in a quickly changing world. On 23 February 1968, the bank announced its merger with Barclays, which was completed by the end of 1969.
At the time, Martins was ‘only just beginning to experiment with data transmission when the merger happened,’ says Snowden. ‘The legacy of all this work, however, was Branch Accounting, a very comprehensive program designed by bank staff would form the basis of Barclays’ own computer systems.’
