Banks to pay customers millions after month's worth of IT outages

Nine major banks and building societies operating in the UK accumulated at least 803 hours - the equivalent of 33 days - of tech outages in the past two years, figures published by a group of MPs show.

The Treasury Committee - which has been investigating the impact of banking IT failures - compelled Barclays, HSBC, Lloyds, Nationwide, Santander, NatWest, Danske Bank, Bank of Ireland and Allied Irish Bank to provide the data.

It does not include the Barclays outage in January or the Lloyds outage last week - two incidents which occurred on payday for many people, and left customers unable to pay their staff and bills.

The report finds Barclays could now face compensation payments of £12.5m.

"For families and individuals living pay cheque to pay cheque, losing access to banking services on payday can be a terrifying experience," said Dame Meg Hillier, the committee's chair.

"The fact there has been enough outages to fill a whole month within the last two years shows customers' frustrations are completely valid," she added.

Speaking on the BBC's Today programme, she said she hoped putting the data in the public domain would encourage banks and the regulator to see if there was any more that could be done to reduce the disruption.

The Treasury said it was "grateful to see the Committee's findings".

A spokesperson told the BBC that the Treasury is "working with the financial authorities to regulate third party suppliers, as well as considering whether the banks are doing all they can to provide the level of service customers expect".

But Patrick Burgess of BCS, the Chartered Institute for IT, says the findings "once again highlights that the traditional banking sector hasn't kept pace with the investment needed to modernise its infrastructure".

The findings come as hundreds of Santander customers reported issues affecting access to the bank's app and physical banking services on Thursday afternoon.

"We're aware that customers are currently unable to access some of our services," the company has told customers visiting its website's service status dashboard.

"We're very sorry for the inconvenience this is causing, and we are working hard to fix the problem as soon as possible."

Barclays compensation

The Treasury Committee data looked at IT failures which affected millions of customers between January 2023 and February this year. They found there had been 158 incidents.

While the data does not include the Barclays outage in January, which left one family without a home, the bank told the committee that over half of online payments over the course of the first day of the outage did not work due to "severe degradation" of their system's performance.

That family was Emily McAllister, from Melton Mowbray in Leicestershire, and her children. Ms McAllister and her 19-year-old daughter Keira, who is autistic and has Down's syndrome, had to spend two nights with her sister and one night at a local hotel after their house move was delayed due to the Barclays outage.

Speaking after the committee released its report, Emily told BBC News that she remained in discussions with Barclays over compensation.

She said: "It should have felt like a fresh start and a new chapter, and it was completely tainted, and will always feel like that, but it is starting to feel like home."

Emily McAllister lives with her 19-year-old daughter Keira and her son Ryan

Barclays confirmed to the committee that it expects to pay between £5m and £7.5m in compensation to customers for "inconvenience or distress".

When taking into account all the information shared by Barclays, this means the bank could pay out up to £12.5m in compensation due to outages over the last two years.

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)

Shilpa Doreswamy is a director with GFT, a company committed to the digital transformation of the financial sector.

"This is a stark reminder of the cost, both financial and personal, of failing IT systems," she said.

"For customers, this isn't just frustrating, it can be devastating. When legacy banking infrastructure keeps crashing, customer trust crashes with it."

In his submission to the committee, Vim Maru - the chief executive of Barclays UK - said the January outage was caused by a software problem with their system, and the incident was not due to a cyber-attack "or any other malicious activity".

"We continue to work through the impact to ensure no customer or client will be out of pocket as a result of the incident."

Barclays told BBC News it was "deeply sorry to customers who have been impacted by any service outage".