Millions in compensation have been paid to customers affected by prolonged IT disruptions at major UK banks and building societies, with Barclays facing the largest payout of up to £12.5m.
The UK‘s major banks and building societies have accumulated a staggering 803 hours, equivalent to 33 days, of tech outages in the past two years. This alarming figure has been revealed by a group of MPs who have been investigating the impact of banking IT failures.
Banking IT failures occur when technology systems fail to perform their intended functions, leading to disruptions in financial services.
Common causes include system upgrades, cyberattacks, and human error.
According to a study by the Ponemon Institute, 61% of banks experience at least one major IT failure per year.
Consequences can be severe, including loss of customer trust, reputational damage, and significant financial losses.
The average cost of a major IT failure is estimated to be around $10 million.
Extensive Downtime Caused Significant Disruption
The Treasury Committee compelled Barclays, HSBC, Lloyds, Nationwide, Santander, NatWest, Danske Bank, Bank of Ireland, and Allied Irish Bank to provide data on their IT outages. The report found that these banks experienced a total of 158 incidents between January 2023 and February this year.
Barclays Faces Largest Compensation Payment
Barclays is expected to face the largest compensation payment, with estimates ranging from £5m to £7.5m for ‘inconvenience or distress‘ caused by its IT outages. When including all information shared by the bank, Barclays could pay up to £12.5m in compensation due to outages over the last two years.
Barclays is a British multinational bank and financial services company.
Founded in 1690 by John Freame and Thomas Gouldsmith, it has a rich history spanning over three centuries.
Initially, the bank provided goldsmith banking services before expanding into discounting bills of exchange.
In 1734, Barclays became one of the first banks to offer overdraft facilities.
By the early 20th century, the bank had established itself as a major player in British finance, with operations extending globally.
Other Banks’ Compensation Payments
The second-highest amount paid out by a firm in that same period is £350,000 from the Bank of Ireland. The compensation paid out by other banks was:
- AIB: £590
-
HSBC: £232,697
-
Lloyds: £160,000
-
Nationwide: £77,452
-
NatWest: £348,000
-
Santander: £17,000
Impact on Customers
The IT outages had a significant impact on customers, with many experiencing difficulties in paying their staff and bills. Dame Meg Hillier, the committee’s chair, stated that losing access to banking services on payday can be a ‘terrifying experience‘ for families and individuals living pay cheque to pay cheque.
Calls for Improved Infrastructure
The findings have highlighted the need for banks to modernize their infrastructure and invest in more reliable technology. Shilpa Doreswamy, a director with GFT, said that failing IT systems can have devastating consequences for customers and erode trust in the banking sector.
Banks’ Response
Barclays has apologized for the inconvenience caused by its IT outages and is working to ensure that no customer or client will be left out of pocket as a result of the incident. The Treasury is also taking steps to regulate third-party suppliers and improve the level of service customers expect from banks.
