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TSB crisis is a cautionary tale for British banks

A reputation can take a long time to build but can disappear in a flash.
Well, it's been longer than a flash, but TSB has done a good job of trashing its own stature over the past few days.It's gone from being a popular challenger bank to the focus of relentless criticism. TSB, all of a sudden, has become the unwilling byword for unreliable technology.Is that unfair? Almost certainly. Upgrading the bank's entire technical foundation was always likely to be a difficult challenge and involve disruption. Customers got a warning that transactions might be affected and, sure enough, they were.But the disruption was worse - a lot worse - than predicted. That's largely because, firstly, there was a glitch that briefly allowed a small group of customers to see information from other people's accounts.TSB responded to that by taking the whole system offline for a while, but when news of the problem leaked out, customers got nervous.They had to wait until Monday morning to access their accounts, only to find that the system still wasn't working properly.Not only were there still glitches, but they were exacerbated by the huge number of people now trying to log on, following a weekend without sight of their finances.Confronted by a creaking website and a struggling app, TSB decided to turn them off again in order to get the problems sorted properly.The repairs took longer than expected - it wasn't until the early hours of Wednesday morning that chief executive Paul Pester declared that "the app and online banking are now up and running".
TSB crisis is a cautionary tale for British banks

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TSB boss 'could be grilled' over shutdown
What followed was a long stream of people saying that they still couldn't access the app, couldn't see their money, couldn't pay their staff and had, in 101 ways, their lives disrupted. While the technology might have been working, it couldn't cope with all the people who were trying to log on, having been denied access for days.
And that is the trouble that our banks face now. They have funnelled us towards technology for the past decade, encouraging the use of banking websites and now mobile phone apps.At RBS, for instance, a remarkable 600,000 customers are logging into their accounts at 8am every Monday and Friday morning. Many of us have become reliant on online banking and, as banks have encouraged all that, so they have reduced our access to more traditional facilities.So while huge sums have been spent on websites, apps and social media, there has been a cull in bank branches since the financial crisis.Over the past decade, the country's biggest banks have closed more than a third of their branches, with plans to close a lot more in the coming years. They consistently tell us that there is falling demand for their services - that some branches regularly have days when fewer than 10 people come through the doors.But that does beg two questions.Firstly, what is the social duty that banks have to look after vulnerable customers - maybe elderly or wary of technology - who don't want to use an app? What about shopkeepers who need somewhere to deposit their cash but don't want to join a huge queue at the Post Office? Even if banks can't make money out of all their branches, don't they need to accept a few losses, cut some executive bonuses and look after their tech-wary account-holders?But secondly - what happens when things go wrong? Ulster Bank and TSB have both had profound problems recently, caused by technical failures. Yes, an app offers a very high level of security, but it's also flawed. Some of the computer code used within these technical platforms is decades old. It's archaic, which is precisely why TSB was so keen to upgrade its system.Nobody is suggesting that banks wind back the clock to a previous era. In fact, long-term, TSB may conclude that the short-term pain, embarrassment and cost of compensation was all worth it if it ends up with a better, more robust system.
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But, as with engineering, or pharmaceuticals or almost any other business, banking needs a regular sense check to determine if technology appropriate is tested, necessary, and proven. Is there a Plan B for when it goes wrong, or an alternative for the wary?For all British banks, the travails of TSB is a warning that technology is brilliant - but also that it needs to be used with care.
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