What's behind the broken banks?

Hardly a day goes by without a story about the UK banking community messing up in some way or other. Some of the highest profile stories of the year have been around banks side-stepping regulation and fixing the markets for their own benefit.

Alongside this, a number of high-street banking brands have also had to own up to IT breakdowns that have denied their customers access to their own accounts or exposed their details to attack in some way.

But behind these technical problems lie process disfunctions, as the banking industry struggles to cope with rapid changes in the global financial landscape, say some industry pundits.

The most recent spate of glitches being suffered by UK high-street banks began towards the beginning of the year with Yorkshire and Clydesdale Bank customers having problems making payments with their debit cards.

The problems occurred in March when the bank outsourced some payment processes to a third party, First Data.

The bank said service was quickly restored, but problems with customers’ debit cards continued for the next two months. Customers tweeted their frustrations to each other and the bank was forced to issue an apology, saying its ATMs were still able to issue cash through using the cards.

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By the end of April, problems were still continuing, with customers unable to make debit card payments or withdraw cash from ATMs. First Data was squarely blamed for the disruption.

In May, HSBC customers suffered similar problems, although it was not clear whether an outsourcer was involved this time. The banks debit cards started to malfunction, denying cash payments from non-HSBC ATMs. This problem also started to affect POS transactions too.

Around the same time, Santander and Barclays customers were denied access to their own accounts over the internet. Only a segment of customers were affected and the banks said they had the situation under control after only a few hours.

RBS losses
By the summer, it was RBS’s turn to suffer the IT gremlins. In June, a botched batch processing software upgrade by staff in its Edinburgh centre denied customers access to funds in their accounts.

In July, the problems transferred to the bank’s NatWest subsidiary where customers were unable to get online access to their accounts or make debit card payments.

The problem got so bad that RBS CEO Stephen Hester was forced to own up, saying the glitches had been a result of the bank focusing on new products and letting core systems decline.