“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.
Strange things are going on in the Mexican banking systems as rumors and denials proliferate, and millions of pesos disappear. Read… Strange Things Are Happening in Mexico’s Banking System
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This comment is about my experience with two like companies, Insurance and Communication. Both blamed their failures on problematic IT upgrades, and/or new head office policies. They also share the concept of 1-800 numbers for contacts, with the customer now required to wait on hold, make menu selections, sometimes redo the selections, and then wait some more. With our telephone service the contact is through a labyrinth of possible selections when after FINALLY reaching a human service provider we promptly reached impasse and I was forced to go through a supervisor and have now been labeled a ‘crisis’ who is handled by a ‘Crisis Mgt Team Leader’.
In the Comm case I wanted to have a new phone line installed in a rural rental I just constructed. The service rep insisted my information did not match their records, and that I was someone else, (even though they take my money monthly for landline services), and have been doing so for 40+ years. (I got the new line!!!)
The insurance company gave me a hard time about trying to purchase insurance for the same rental, after starting construction. “But it had no value to insure before construction”, my reply. “That doesn’t matter”, they said. “Because you are applying now, this is the formula we use for rates and the amount you are required to purchase”.
The phone issue was finally resolved due to my apparent threatening behaviours and my insistence to go to a consumer television program with the story. (Monopoly, so I could not bail). The insurance problem was resolved by switching companies, which was a big big hassle requiring visits to many competitors. I realized the other day we purchase over $5,000/yr of insurance for houses, cars, etc. Apparently, our business wasn’t worth polite interaction.
Bank customers need to switch before they get screwed. Yes, it is a hassle, but big institutions now have us trained to expect poor customer service and down right malfeasance. Only by leaving do we send a message. In the case of our insurance company I followed our departure with emails to Board Members outlining our dissatisfactions. It might not have any effect right now, but if many people did likewise we might once again return to a world of real customer service.
The original concept of the bankers competition was once a point of trying to get away from using banks all together. Sadly investment mentality and corruption ran their course and cryptocurrency came up short. Seeing so many people buy into crypto over the last 5 years shows the drive is there to bail on current currency holders/lenders though. Maybe the next wave will hit the mark.
Proteo4UK was designed by Accenture? ! Another win for “consulting”….or what…..?
https://www.bankingtech.com/2017/12/tsb-unveils-new-banking-tech-platform-proteo4uk/
Kiers,
I read the article you reference and I’m laughing so hard I can hardly type. There are so many great quotes in it. It is like a Mark Twain short story. I especially like the: “Carlos Abarca, CIO of TSB, says the new system is “customer centric by design” and “enables the open banking revolution”.” I mean really I guess a focus on shafting the customer could be considered “customer centric”. And who knew open banking meant letting anyone but you into your account!
But my favorite sound bite is the one about the system running out of two data centers so if one goes south “…all critical services will switch “with no interruption or loss of customer data, transactions or services” to the other one…”.
I guess TSB thought that the CIO position was a public affairs position (information?) and not an IT position.
I’m sure this isn’t as hilarious for the shaftees, er… I mean customers in the UK.
“Teradata’s tech supports data acquisition, IBM Infosphere provides data integration and MicroStrategy enables data exploitation”
Well, they were on the money with the data exploltation!
Old Engineer,
My favorite line was “In all, 2,500 years-worth of labour had been put into the project..”
In reality that’s PM/IT/QA working 10 hours a day 5 days a week for 18 months (length of project) so the actual size of the project was approximately 1,666 people for 18 months. At 1,600+ people, I’m guessing they had the “best and brightest” of the offshore/nearshore Coders and QA.
Speaking from experience, data migration is painful, detail oriented work. And I’ll bet money that the consultants/employees in charge of the data migration never validated their work all the way through the systems. Migrations that fail this badly out of the gate, and large problems continuing for an entire month are very close to death.
If I lived in the UK, I’d have been telling everyone I knew who had an account of any kind to get it out as fast as humanly possible in the first week.
2GeekRnot2Geek,
Not sure if you are serious about 1600+ people working on the project. Even if it was only 1000 I would think it would be very difficult to effectively integrate all of that effort regardless of the time allowed.
I agree with you assessment of migrations that fail this badly out of the gate. They will feel the need to urgently “patch” the system and will it only get more unreliable (or as we used to say, buggier) as they become more and more frantic to fix it quickly. Remember the Denver Airport luggage handling fiasco? It’s failure supports your assessment of the likely outcome.
I was once involved with a very large tech upgrade for a very influential govt dept. I was the middleware representative and Accenture were the integrators. The govt tech guys were excellent, really on the ball and savvy. It was a joy working with them. The Accenture guys…not so much. It got so that when things started to go south (as they inevitably do), the first Severity 1 bug was enough to send the Accenture PM (nice guy, but young) scurrying home. He didn’t respond to phone calls, knocks at his front door, nothing. Found out later he had suffered a series of panic attacks culminating in a nervous breakdown.
Anyway, the non-comm went on like this, Sev 1s building up, for almost a week before Accenture finally sent someone else in to manage the integration. Thankfully, the govt dept had *five* levels of system redundancy, so by the time we migrated up to Level 1 (all of us on-call 24×7 throughout), all the bugs were ironed out.
Accenture, though. Still gives me a laugh when I think about it. Good times.
PS Speaking of breakdowns, I only got the middleware gig because the guy before *me* had suffered a nervous breakdown and left after only 6 weeks on the job. Some parts of IT are not for the faint of heart.
Old Engineer,
Sorry for the reply above, below would have put this way down the thread.
1600+ is probably high, but that’s a standard 10 hr day 52 wks per yr for 18 months. A lot of time was probably accumulated in the “death march” hours of the last 3-4 months when things were going off the rails. So people were working 12-14 hours a day 6 days a week, and management refused to push the release date back.
Sorry hit enter before I was done.
Yes data migrations are always difficult to integrate. A rule of thumb is that the data migration of this size and importance (Peoples money) is completed and validated at least 3-4 months before go-live. That way all involved in other processes have months of time to test with tons of real data in the final form. (real migrators know how to mask/create data for this process) Pre-production bugs show up quickly and often if this rule is followed.
On a humorous note, this is what I tell newbies (as it was told to me back in ancient times.) It costs 3X as much to fix a bug once it gets to production. At this point I’d say TSB is in the 7 to 8X range. =:-O
“It was a massive effort – 300,000 hours of partner training, 80,000 tests so far.”
And it’s a spectacular success!
ROTFLMAO (rolling on the floor laughing my a** off).
What training?
Not to drool into the keyboard – at least not in front of other people!?
We called them “Accidenture” in BHP…
Doh!
Where is the Bank of England, which should have stepped in to allay fears and make it plain that the bank will make everyone whole or its assets will be seized.
The historian Philip Mirowski is great at showing just how the neoliberal mindset has infected so many aspects of governance that other than handing banks and rich people more money to stimulate “wealth effects” i.e. trickle-down, nation-states seem bereft of any policies to deal with economic issues. When you believe as holy writ that markets are infallible and that human beings should be subordinate to them this is the kind of mindless crap that you get. The whole anti-human, pro-market ideological consensus is terrifying. Jesus once said that the Sabbath was made for man, not man for the Sabbath. The same crazy inversion–man was made to serve the market, not markets exist to serve man–seems to be standard operating procedure these days.
I assume TSB stands for “Tough S**t Bank”.
With 10s of billions of pounds up for grabs at TSB, so to speak, why haven’t regulators shut this bank down?
Why aren’t regulators FORCING TSB to transfer accounts to real banks?
Why aren’t other banks AGGRESSIVELY competing to get TSB customers to transfer?
Why aren’t thousands of shareholders suing the crap out of TSB & Sabadell?
Speaking as a retired ex-IT guy, auditor, and CFO, this is one of the most absurd self-inflicted wounds I’ve read about since HP pretended they could perform due diligence.
Well, “Regulation does not work”, so, we dont wanna have the Bank of England going out and letting the team down by demonstrating that Regulation and Enforcement of It indeed does work!
With TSB we are in “Stage 1” the consensus building game: Everybody knows that TSB is finished, done, hacked into oblivion.
Everybody does not yet fully know that everybody else knows this. That is “Stage 2”. “Everybody knows that Everybody knows …” then people will react to what is now common knowledge.
I.O.W: Once that point is reached, then the bank run will follow. Except its gonna be a hard slog and it might take a while, since they can’t find their customers money!
More like a bank crawl, really. But interesting to watch from a safe distance.
At this Brexit point in time, things are a little delicate.
As Spain (Gibraltar), Satander, and the ECB, are on the other end of this little, TSB problem, in England.
Should TSB, start to refuse to make good, on monies that have “disappeared”, during the technical problem period. I would expect much more aggressive action from British regulators will be forthcoming.
In the US, you’d have OCC, FRB and CFPB so far up your behind you wouldn’t be able to swallow without breaking wind first, and the millennial that they call your direct report would be thrashing about like a decapitated “artificial lifeform” in an Alien sequel.
Apparently this is what is required for customers to leave their bank. Of all the other myriad of things that you could serve up to damage your customers was apparently not enough to scare away any significant number of Wells Fargo customers.
Warren Buffett downplaying the negatives at Wells during the Berkshire annual meeting by saying that all large companies have some problems took the cake.
Although banks are filled with their own importance and executive salaries that match that self perceived importance, they are really only a utility.
Banking services are like water and electricity suppliers, important but should not be powerful as they have now become.
One wonders how a basic function of service came to rule our societies?
So, explain to me why we need to have banks online. This makes slightly more sense than putting nuclear reactors and chemical plants on the internet.
I cannot imagine NOT banking online. I do nearly everything online. Why would I want to waste time going to branch? I can do in 3 minutes online what would take me 45 minutes going to the branch. But I do expect my bank to know what it is doing in terms of the basics, like keeping the IT system functional.
The physical reality of money these days is that an amount of money is nothing but an entry in a ledger. A bank that doesn’t/can’t maintain ledgers is … “not a bank” sounds much too feeble to describe the situation.
Even to talk about “finding people’s money” implies that the money is still somewhere to be found after the (electronic) books have been scrambled.
I’m with you about ease and convenience – but I do reflect every once in a while that many years ago transactions took months to be completed, communications then improved such that sending a letter and getting an answer back in the US could take less than a month, but somehow business empires were built and managed, people traded and sent money to each other, and government governed … and even within my lifetime, when you went to the bank, during limited hours five days a week, the teller would look up and record your transactions on an index card and your personal little bank book which you carefully inspected when it was handed back, an interaction between two individuals which could be immediately verified and challenged.
The evolving need for speed is not without its hazards though.
Nothing in this story has anything to do with transaction automation. It has everything to do with project management failure run amok in an environment that, due to an inherent abundance of greed, incompetence and mendacity, produces technology failure opportunities in great quantities: a bank.
“produces technology failure opportunities in great quantities: a bank.”
More accuracy required should read a SPANISH Bank.
This is after all the kind of thing that kills companies. Even Sony data leak wasn’t as bad as this.
First accidental bank run?
Should this not read
“First self inflicted bank run”???
Who is going to save us from these charlatans??????
When governments stop taxing labor and start taxing machines, then we will have better customer service and everyone will find a job.
Yes this is a separate issue from banks being unable to keep their books straight. As the saying goes, to err is human, to really screw up you need a computer.
There is a difference between you sending a transfer request to the bank, and the bank company records being changed. Only the bank is supposed to have access to changing its accounting records. By giving that power to the customer, a bunch of machines, the internet, and other third parties, the banks have implemented their business model on the cheap. Get rid of all people in the process because they are too expensive within the system of government regulation and taxes.