UK banks’ IT systems are having a heart attack

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By:
Peter Lee
Published on:

The frequency and severity of UK banks’ IT failures are troubling their customers even if their regulators remain calm.

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On September 12, Barclays proclaimed itself the first UK high street bank to allow its customers to view in its proprietary mobile app their current accounts at rival providers.

It looks like a big step forward in open banking.

Catherine McGrath, managing director of retail banking at Barclays, says: “Today, lots of people have current accounts with more than one bank, so keeping track of your finances can be tricky as well as time-consuming. Our new feature is designed to solve this problem, offering a simple and secure way to get a clearer picture of your finances, all in the place six million of our customers already go to do their banking.”

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Catherine McGrath,
Barclays

Thankfully, the feature has been designed with customer safety at its heart, Barclays assures us. It uses industry-approved open banking API technology to ensure that customers’ accounts are linked into the app securely, without them ever needing to give out their other banks’ usernames or passwords.

How very modern.

Unfortunately, by the end of September, Barclays customers had suffered temporary outages that left them unable to access online banking. Meanwhile, users of HSBC’s mobile app were reporting similar difficulties, these latest snafus coming after outages earlier this year at Tesco Bank and most infamously at TSB, whose badly mismanaged IT system changeover cost chief executive Paul Pester his job.

This is starting to look like a pattern of repeat disappointment for customers of the dominant UK banks and embarrassment for their top executives.

Struggle

Across the world, big banks are struggling to keep pace with new offerings from fintech challengers that don’t fit easily onto the incumbents’ decades-old legacy IT systems. But, as Lev Lesokhin, senior vice president of strategy and analytics at software consultancy Cast, points out: “Banks in other geographies don’t have as many problems as UK banks. Based on our research, UK-serving banks such as HSBC and TSB don’t do as good a job controlling the structural quality of their legacy systems.”

There doesn’t seem much point trumpeting the latest gee-whiz tech offering to the same customers UK banks are now regularly locking out of their own accounts and who just want to be sure their salary is going in to meet rent, mortgage and other bills going out.


UK regulators must now take a much closer look at these IT system tremors before we see a full-scale breakdown 

Back in July, the Bank of England, the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) showed just how seriously UK regulators are taking all this.

They published a joint discussion paper, no less, on an approach to improve the operational resilience of firms and financial market infrastructures (FMIs).

This paper “reinforces the need for firms and FMIs to develop and improve response capabilities so that any wider impact of disruptive events is contained,” the UK regulators thundered. And just in case that sounded like meek acceptance that UK banks’ systems are bound to keep falling over and a reminder to stock up on emergency patches, the regulators starkly set out to banks just how cross they are.

“The supervisory authorities may expect some firms and FMIs to consider the FPC’s impact tolerance when they set their own tolerances.” Well, that’s certainly telling them.


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UK bank regulators discuss urgent action over IT failures


Euromoney recalls the scene in Monty Pythons Life of Brian when the leaders of the Judean People’s Front are urged to take decisive action to rescue their messiah, ideally before his imminent execution. “Absolutely,” the grave-faced Pythons conclude. “Brand new resolution?” And they sit back on their rugs to draft it.

The comment period for that discussion paper has just expired.

UK regulators must now take a much closer look at these IT system tremors before we see a full-scale breakdown.

Or are they asleep at the switch as well?