“It is unacceptable for banks not to keep our accounts safe.”
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
UK Bank TSB’s unending IT nightmare is beginning to take a toll on the bank’s financial health. Analysts say the chaos caused by the botched IT upgrade will cost tens of millions of pounds in fines and compensation. And that’s based on the rosy assumption that the problems the upgrade has caused will be remedied in the near future. For the moment there’s little sign of that happening. And this nightmare has been dragging on for a month now — April 24: “Day 5”, April 30: “Contagion Fears,” and May 6: “Internal Revolt.”
Many TSB mortgage account holders are still unable to access their online accounts while business customers continue to have difficulty making online payments, The Guardian reported. Some credit card customers are still being wrongly informed that payment of £0.00 will be taken, while the bank’s internal secure messaging service remains unavailable. To compound matters, a growing number of the bank’s branch and other front-line workers, many of whom have had to bear the brunt of customer ire over the past four weeks, are close to the end of their tether.
As if that wasn’t enough, fraudsters have now begun targeting the online accounts of TSB customers, some of whom have logged into their accounts to discover their savings have vanished in a series of payments they did not make. They are then left on hold for hours when they try to complain to the crisis-plagued bank.
“When a [big IT] ‘change’ goes wrong and so publicly like TSB’s, it’s like cyber blood in the water,” Ian Thornton-Trump, chief technical officer of Octopi Managed Services, an IT company, told Wired. “Cyber criminals pay attention to companies rocked by internal scandals or public ‘ball drops’ and react accordingly.”
Teacher Ewan Monaghan had his savings raided by fraudsters last Wednesday after receiving an email from TSB congratulating him on a new overdraft that he had not requested. He then checked his and his wife’s accounts only to discover they had been emptied. The thieves also ran up a £3,000 overdraft, and TSB is apparently charging him interest on it. “It is unacceptable for banks not to keep our accounts safe. TSB do not seem to be fussed about sorting this out,” he said.
Some customers are now voting with their feet and are moving their money elsewhere. Rival lenders are reporting a sharp rise in the number of customers joining them from TSB, as droves of irked depositors abandon the beleaguered bank. Three major high street lenders – HSBC, RBS and Metro Bank – have reported seeing a rise in the number of customers leaving TSB and switching accounts to them since the problems began.
A spokesman for Nationwide, the largest “building society” in the UK — a “building society” is a member-owned financial institution similar to a credit union in the US — said: “Since the start of the issues at TSB we have seen an increase in traffic to the current account pages on our website and an increase in people choosing to switch to Nationwide.”
If the last ten years of post-crisis hangover have taught us anything, it is that bank customers will put up with no end of poor service, abuse and even outright criminality before even thinking about moving their accounts. But it’s a whole different matter when a bank is unable to provide its customers with even the most basic banking services, leaving many of them facing weeks of financial turmoil and uncertainty.
“A lot of people stick with their bank as they think every bank is the same – until something happens,” says Personal finance expert Andrew Hagger. “With TSB, customers were not able to access accounts, and then weren’t able to speak to somebody about it. Some people lost out financially, or experienced severe stress, and don’t want to risk going through that again.”
Moving accounts between lenders is a lot easier in the UK today thanks to the launch in 2013 of the Current Account Switch Service (Cass). This enables customers to switch from one current account to another, while keeping their direct debits, standing orders and any other regular payments – both outgoing and incoming – intact. Saved payees are also moved across.
The ease of moving between banks heightens the risk of a mass customer exodus from TSB. For TSB’s parent company, Spain’s Banco Sabadell, this should be a major cause of concern. Its purchase of the UK lender in 2015 was meant to reduce, not amplify, Sabadell’s risk exposure, by diversifying its operations away from the domestic Spanish market, in particular the tumultuous local region of Catalonia.
Even at the time of the acquisition experts warned that Sabadell was significantly overpaying for TSB by offering €2.35 billion for the UK based lender — the equivalent of a 29% premium — while underestimating the potential costs of integrating the new business into its existing IT platform. Some also cautioned about the potential risk posed by a vote in favor of Brexit, which has since come to pass.
But it was Sabadell’s reckless determination to rush through an exceedingly ambitious, complex, and risky data migration without taking the most basic of precautions, all in the name of saving costs, that has done the most harm. The ongoing banking meltdown at TSB has done incalculable, probably irreversible damage to the UK lender’s image and reputation. Now it risks losing a large part of its customer base. Given that TSB represents roughly a quarter of Banco Sabadell’s total assets, the impact on the Spanish bank’s own financial health could be considerable. By Don Quijones.