Ongoing IT meltdowns could leave two thirds of consumers vulnerable to payment issues, says Which?

New research from Which? has found that three quarters of the population only bank with one provider – leaving them particularly vulnerable to being financially cut off by an IT outage.

The consumer group found that just over three quarters (77%) either have just one current account or more than one current account but all with the same provider – and that three in ten (29%) never or rarely carry cash. These people would be particularly vulnerable to IT banking failure.

Meanwhile, over two thirds (68%) either had just one bank card (debit or credit), or multiple cards with the same payment scheme (i.e Visa, Mastercard or Amex), meaning a scheme failure, such as Visa’s large-scale June 2018 crash, would leave them unable to make card payments.

Financial Conduct Authority data shows that in the last year, the main UK banks suffered 265 IT shutdowns that prevented customers making payments – up from 228 the year before. 

Increased scrutiny is being placed on the banking industry – most recently by the Treasury select committee – over its inability to prevent IT glitches from happening with such regularity – with calls for banks to work towards providing much more consistent services. 

Which? spoke to an industry insider who raised concerns over outdated ‘legacy systems’ across the industry that struggle to keep up with the demands of modern banking – and can be up to 50 years old.

As banking services increasingly move online it’s crucial that the industry ensures its digital systems are robust and that the number of outages endured by customers drastically decreases.

If banks and card schemes want customers to have confidence in the switch to digital payments they must prioritise working towards more reliable services, while providing greater support to the many consumers who need additional help if they are to adapt to new banking systems and payment methods.

With such a regular rate of IT failures across the banking industry, Which? believes the industry must urgently work to minimise the impact on customers and protect the availability of cash as a vital backup when systems inevitably fail. Widespread cashpoint and bank branch closures in recent years have left the UK’s cash landscape on the verge of collapse.

Which? is calling on the government to introduce legislation that protects cash for as long as it is needed – with this payment method also acting as a crucial backup while IT systems go down.

Jenny Ross, Which? Money Editor, said:

“We found that the vast majority of people only have one payment option, leaving them especially vulnerable to being shut out of payments by IT outages that hit bank customers almost every day.

“If the industry wants to encourage people online then banks must demonstrate that their systems are up to scratch by drastically reducing the number of outages that customers endure. 

“It’s clear the government should introduce legislation to protect cash – not just for all those reliant on this payment method – but as a vital backup when digital systems fail.”

Notes to editors

Which? surveyed 1,500 adults between 31st October and 2 November 2019. Fieldwork was carried out online by Deltapoll and data has been weighted to be representative of the population of Great Britain (aged 18+).”

Parliament’s Treasury Committee published a damning report on IT failures in financial services in which it branded the number of outages ‘unacceptable.’ The report says that if regulators feel firms aren’t managing outsourcing risks properly, they should step in and toughen up the rules governing  these relationships. 

Which? previously revealed that one in seven of the population were left unable to use their card due to an outage in the last year – with half of those affected by the outage(49%) saying they couldn’t pay for goods and services at the point of sale as a result.

Throughout its Freedom to Pay campaign, Which? has highlighted the importance of protecting cash – not only for all those who rely on this payment method – but as a vital backup when payment and banking systems fail.

Which? found that under a third (29%) said they never or very rarely carry cash, meaning they lack a fallback option if their card fails in a shop.

Legacy risk – Comments from anonymous industry insider

We spoke with an insider who has more than 20 years’ experience working with systems at banks  both large and small. Speaking on condition of anonymity, he said the immense pace of change meant systems become ‘legacy’ (at least partially outdated) in as little as five years – yet some traditional banks have systems that are 30, 40 or even 50 years old. While some legacy systems may be relatively robust, they pose an insurmountable problem because they’re not geared to the demands of modern banking. Over the years, systems are altered as services are added, taken away  or outsourced, eventually leading to vast complexity. Huge IT upgrades or migrations can be one response. But as the TSB debacle shows, when things go wrong the results can be catastrophic. Such migrations are also staggeringly expensive, regardless of whether they go awry. Our source believes that the costs and risks create an ‘anti-change culture’ at some banks, meaning they’re more likely to keep patching up antiquated systems. In any case, he feels that the complexity of legacy systems is ‘impossible to solve through traditional moves such  as upgrades or migration’. Instead he says that so-called flanker brands are a better solution for the traditional banks: ‘Just start from scratch [with a brand-new bank] using modern technology, in a different building’. The idea is that new customers are recruited to the new brand, with the old bank very slowly wound down over time, as its customers close their accounts.

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