TSB IT chaos: Challenger bank has fallen prey to some familiar old problems

Thousands of customers have struggled to access their accounts and process transactions

It’s not just the scale of the cockup, but the bank’s poor approach to communicating with customers, that has proved damaging (Reuters)

With customers screaming about a deafening silence from TSB towers in the wake of the IT chaos that has afflicted the challenger bank, chief executive Paul Pester finally emerged with a veritable blizzard of tweets and media appearances.

TSB’s surprisingly torpid feed had been silent since Thursday, when it warned customers that online banking services would be unavailable over the weekend as a result of a systems upgrade.

It woke up when the CEO said he was “deeply sorry” for a rapidly lengthening list of problems caused by it. There was the promise of compensation for those left out of pocket, but also a warning that the bank would have to go offline again as part of its attempt to address the issues it has thrown up.

The upgrade involved moving a vast store of customer data from systems rented from previous owner Lloyds to shiny new bespoke ones – which turned out not to be so shiny for tens of thousands of customers.

They complained of being locked of their accounts and unable to process transactions. Properties were lost, businesses were unable to make payments and people were left high and dry.

Just as disturbing were the reports that some customers had been able to see details of other customers’ accounts.

They have attracted the attention of the Information Commissioner's Office, as well as the Financial Conduct Authority (FCA).

TSB’s problems are, it seems, just beginning – and they could get very expensive.

I was told nine separate dry runs were performed as part of a battery of tests on the new systems. The adequacy of them now looks highly questionable.

I was also informed that the vast majority of customers were unaffected by the problems, which really isn’t the point given that it appears they were anything but isolated.

As a result, TSB now has some serious questions to answer.

The pity of it is that the bank, fresh from being spun out of Lloyds, started out so well.

When I talked to Mr Pester around that time, he was full of ideas, some quite innovative. Both customers and those in the trade (mortgage brokers, for example) spoke highly of them.

There were promises that the subsequent takeover by Spain’s Banco Sabadell wouldn't change that. TSB would continue to add some competitive vim to an otherwise moribund market.

Sadly, it now seems like this new bank is actually much the same as the old banks.

It’s not just the scale of the cockup that has proved problematic. It is the bank’s leaden-footed approach to communicating with those customers who have been caught up in it. Mr Pester’s 48 hour absence as the issues emerged is part of that.

Some of those who appeared on radio phone-ins to talk about the distress they were caused said they were considering moving their accounts in the wake of this.

I wouldn’t blame them. Quite where they could go to avoid this sort of thing is, however, an open question.

It is certainly something the FCA should reflect on.