Banks are trusted guardians of our money. As long as our money is safe, then we trust them. It’s when our money is breached or lost that banks misbehave, which is why the 2008 financial crisis was so concerning. The run on Northern Rock and Bear Stearns were terrible moments but, in either case, neither lost our money because it is protected by an insurance scheme and government guarantee.
However, it does illustrate the issue: a bank is a bank because it is a trusted store of value, with an insurance scheme and government guarantee that they won’t lose our money.
This is why, when a bank exposes our money to loss, that it gets vilified. Hence, during the weekend, one of our larger challenger banks, TSB (a spin-off of Lloyds), got into trouble. Over the weekend, customers were unable to access online services. A TSB spokesperson said: “We are currently experiencing large volumes of customers accessing our mobile app and internet banking which is leading to some intermittent issues with people accessing our services.” That was a little bit of washing over the issue, when the media got to hear about it.
For example, the internationally renowned Derby Telegraph reports: Mum left with little food or fuel after TSB internet banking failure.
The issue is actually a small, but major one. The small challenge is breaking apart from Lloyds Banking Group and migrating to Banco Sabadell’s new platform. TSB spun-off from Lloyds in 2013, but had been running some of its core systems on the old Lloyds Banking platforms. Finally, the bank was separating in full from Lloyds and it messed up.
In another case, for example, Laim McKenzie, 20, said that he signed into his banking app on Sunday and saw someone else’s account as well as his own. He said that he saw £13,000 from someone else’s account when he logged on to his TSB app.
“I got back into my account again and it showed that nothing was in my account at all – not even my overdraft was there, just showed as 0.00. I was absolutely worried when I saw what was going in my account. [I feel] pretty uneasy to be honest … You don’t mess with people’s money, because it’s how people get around, pay their bills etc – not knowing what’s going on with it is a really uneasy feeling.”
Laim now plans to switch banks because of problems he had with TSB this weekend.
According to TSB, the issue was that, for 20 minutes on Sunday evening, there was an issue of exposure whereby linked (or nominee) accounts were compromised. This meant that accounts where someone other than the main account holder is given restricted access to the account, were accessible to additional people via online banking. TSB claims that 110,000 people use such an account and the actual number who logged in who could see such information was 402. The bank is working hard to fix it and it apologises for the problem.
Strangely enough, it is something that I’ve only heard about once during the five year managed transition away from Lloyds Banking Group’s core systems so, in some ways, I would call this a success. After all, just one outage when you are migrating millions of lines of code and billions of customer records is a pretty small failure. For example, this 20 minute issue affecting 402 accounts occured after transferring 1.3 billion customer records from its former parent Lloyds Banking Group over the weekend to finish the five-year transition period, during which time the new bank has extricated its IT systems from Lloyds’ infrastructure.
Moving 1.3 billion records and only having an issue for 20 minutes and 402 accounts is putting this in context. It doesn’t help the millions of customers who can’t use online services whilst they fix this, but hey, wouldn’t you rather be safe than sorry?
That doesn’t stop the media getting on their high horse about it though, with 100s of news headlines this week about the outage.
So yes, compromising customers’ accounts is the worst thing a bank can do … but were they compromised and will Laim really switch banks? I doubt it. After all, most people didn’t lose any money and, even if they did, it is guaranteed by the bank charter to be reimbursed.
So yes, it is truly embarrassing for TSB and yes, it is bad, but it is not going to bring down the bank. In fact, what surprised me the most, is that around TSB has five and a half million customers. 5.5 million customers! Now, that’s really a challenger bank.
For more information on the issue, there’s a live update feed from The Guardian here.
I just got a comment from Andrew and so, for those who don’t read comments, thought I’d add it and my answer here. Andrew asks: