Lessons to be learned from TSB meltdown


“We apologise for any inconvenience you might be experiencing. If you wish to make a complaint, please contact us. We’ll do our best to put things right.” 

Now, that’s not the sort of welcome message any company wants plastered across their website welcome page.

But for TSB this week it was the only option. The bank was ‘on its knees’ according to chief executive officer Paul Pester.

Days of computer chaos left half the bank’s customers unable to access online accounts, cascading financial mayhem throughout the country.

It all stemmed from a botched bid to migrate the TSB’s customer account system from its former Lloyds Bank system to a platform built by parent company Banco Sabadell, of Spain.

Despite rigorous testing, the system failed – leaving 50 per cent of customers without money, beleaguered frontline staff in tears and Anglo-Spanish relations severely strained.

Add in various offers on overdrafts, charges and interest rates being bandied about as sweeteners and we saw a business backpedalling frantically from a fiasco of its own creation.

When the dust settles, as it always does, the reputational damage to TSB will become apparent – and at present it looks quite severe with myriad customers threatening to cancel accounts.

Software meltdowns are not uncommon – we have all experienced them in the workplace – but while these are hugely irritating and inconvenient they generally remain internal with clients unaffected.

There inherent risk in switching or upgrading systems while external operations continue, but the need to modernise, rationalise or redevelop often outweighs practical considerations.

This also begs the question as to why large businesses feel the need to build their own IT systems from scratch rather than buying an off-the-shelf product.

It’s not a quick process even for an SME, so when a giant corporation takes the plunge it will have good reason to do so. And there are good reasons.

Businesses building their own systems are not reliant on the success – or the reverse – of a third party. Mass produced systems used by many clients must appeal and work across the board.

A bespoke system is deemed to be worth the effort because of the customisation it allows and the longer term appreciable improvement it will drive – features and tools optimised for specific use can be included and future-proofed flexibility and scalability permits updates

A point to bear in mind is that any company developing a new IT system would be eligible for Research & Development (R&D) tax credits, to reduce the overall actual cost – as, indeed, do technology updates.

Software remains a mystery, with much uncertainty to most people and for end users – frontline staff and customers – the only consideration is that the kit works.

They don’t need to know what happens behind the scenes to make it work or how many machines are whirring away in server rooms.

That is, until it all goes wrong. That’s when questions start being asked and the background systems are suddenly cast into the spotlight. There is no good time for this to happen, especially now. More often than not, just like TSB, when a large company looks to migrate legacy systems to a new system there are risks, challenges and of course failures along the way.

For let’s not forget that the UK banking sector is a pretty crowded place at present with dozens, if not hundreds, of fintech challengers waiting to step over the cold body of a fallen giant and scoop up its customers.

They all have USPs, intend to spot gaps in the market, aim to change the sector significantly and obviously feel their product is the best. And, significantly, they are hi-tech across the board, embracing the latest technology and pushing boundaries wider.

The world of challenger banks and their ilk is digital, their operating costs are relatively low and they operate across many spheres – from lending and cards to FX and cryptocurrency.

The number of start-ups – being financed in various ways – indicates that the banking giants may start to feel the cold wind of competition blowing around their ankles. Whether this will lead to further sector fragmentation as niche businesses begin to capture market share remains to be seen.

Embracing technological Innovation is the key and with Fintech start-ups growing exponentially and working across a multitude of fields from financial literacy and education through retail banking and investment, it is not hard to visualise a near future time when challengers become the key players.

That key is disruption with the traditional, sometimes laborious, banking methods of the established institutions being replaced by apps, mobile services, peer-to-peer lending, blockchain technology and no fee businesses.

Disrupters are boosted by rapidly developing technology allowing analytics, artificial intelligence, automatic learning and compliant data gathering to become the norm. The quick adoption of these tools offers advantages over the slow-moving giants.

That said, we should not lose sight of the fact that just because a news business seems the digital equivalent of ‘all bells and whistles’ it is not necessarily a good business.

Using the latest technological innovations is a way of improving a business, not a reason to set one up. Old fashioned values of a solid base, a good idea and competent people remain just as important.

And when one does engage in any business transformation it is imperative to ensure it is foolproof – just ask whoever signed off the TBS customer account system migration.

 


Lessons to be learned from TSB meltdown


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