Paul Pester, chief executive of TSB bank in the United Kingdom, expressed his regret Wednesday during a Parliamentary Treasury Committee inquiry into the service disruptions caused by the bank’s move to a new IT system. Pester was especially remorseful since his decision has severely damaged the bank’s reputation, infuriated tens if not hundreds of thousands of customers who could not access their bank accounts, and so far has cost Pester an “integration bonus” of at least £1.6 million, if not eventually his job.
The Committee had called in Pester and TSB chairman, Richard Meddings, to explain why―10 days after TSB migrated to a new IT infrastructure platform―customers still couldn’t access their bank accounts reliably if at all, or found incorrect or missing account information. The Committee further wanted to know when the bank’s IT problems would be fixed and how much the bank expected to compensate its customers.
TSB’s problems began Sunday night, April 22, after the bank completed its weekend-long migration to a platform called Proteo4UK. The migration involved the transfer of more than 1.3 billion records related to 5.2 million customers from Lloyds Bank’s IT systems. Soon after the migration was complete, customers began complaining that they weren’t able to access their accounts online or through their mobile devices, while others said they were seeing incorrect account information including zero balances.
One customer, for instance, said his account was mistakenly credited with £13,000, while another said he could access someone else's account, including their £35,000 savings account, £11,000 individual savings account, and business account.
TSB acknowledged on the Monday after the migration that many of its 1.9 million mobile and Internet banking customers were experiencing “intermittent” problems accessing their accounts, but tried to downplay the issues. Sabadell, the Spanish parent bank that owns TSB, for instance, maintained on its website that the problems were minor and the migration was a success.
However, livid TSB customers and the Treasury Committee begged to differ, and by the end of Tuesday, the Committee demanded TSB answer questions about what was going on at a public hearing the following week.
The botched migration was supposed to be the final act of TSB’s divestiture from Lloyds Banking Group as required by a European Commission ruling. The divestiture was a condition for allowing the U.K. government to provide state aid to Lloyds during the financial crisis. In 2013, TSB was detached from Lloyds and in March 2015, TSB was acquired by Sabadell.
At the acquisition, Sabadell announced that it planned to move TSB customers to its proprietary Proteo IT platform as part of a £250 million investment in new and improved digital services. The migration to Proteo4UK was supposed to take place last November, but was delayed to last month at a cost of some £70 million.
Early on the Wednesday morning following the botched migration, TSB CEO Pester declared the bank’s IT problems were fixed, which quickly sparked yet another tsunami of criticism and derision. Thousands of customers were irate, complaining they still couldn’t access their accounts, or when they did, there was something wrong. Businesses complained, too, that they couldn’t tell what was being credited or debited from their accounts.
It soon became clear that nearly half of TSB branch offices were also negatively affected by migration related issues, with some branches accused of trying to hide from angry customers. In addition, customers calling TSB customer service lines found increasingly long waits. The ensuing uproar caused Pester to backtrack and admit problems still remained and offer an apology.
By Thursday, TSB executives announced that account overdraft fees would be waived, and that extra interest would be paid on current accounts. Pester confessed that the bank was now on its “knees,” did not know how TSB customers were actually being affected, nor what was causing the problems. He said the bank had hired IBM to find and sort the problems within the next three days. Customers were told that it would likely be sometime in the first week of May before everything returned to normal.
However, the access and account information issues continued unabated into last weekend and throughout this week. Members of the Treasury Committee were not a happy lot when Pester and Meddings appeared before them this past Wednesday.
While Pester admitted in his testimony that going live with Proteo4UK was a mistake, he also insisted that the migration had gone well, that the problem seemed to be rooted merely in a system capacity issue, and that all customers were now able to access their accounts. This latter claim was directly challenged by the Treasury Committee, which told Pester their own members who were TSB customers were still not able to access their accounts.
Under intense questioning, the TSB executives admitted that they still did not know exactly what the cause of the problem was, how many customers were still having difficulty, how many would receive compensation, or most importantly, when the bank would return to normal operations. The only thing they did seem to know was that 40,000 customers so far had filed complaints against it and that Pester would be foregoing his integration bonus.
Even after all of TSB IT issues are eventually sorted out, which may be still be weeks away, it will likely be years before everything returns to something resembling normal, as the Royal Bank of Scotland (RBS) Group found out after its monumental IT meltdown of 2012.
Customers need to be compensated; internal TSB and governmental investigations into what went wrong must be performed (which some are already blaming on inadequate testing and poor communications), and punitive regulatory fines will have to be determined and imposed. It will likely be even longer before TSB regains its reputation as a reliable bank, assuming nothing else goes awry.
Robert N. Charette is a Contributing Editor to IEEE Spectrum and an acknowledged international authority on information technology and systems risk management. A self-described “risk ecologist,” he is interested in the intersections of business, political, technological, and societal risks. Charette is an award-winning author of multiple books and numerous articles on the subjects of risk management, project and program management, innovation, and entrepreneurship. A Life Senior Member of the IEEE, Charette was a recipient of the IEEE Computer Society’s Golden Core Award in 2008.