Barclays Faces Millions in Compensation for IT Outages
Barclays is set to pay millions of pounds in compensation to customers affected by recent IT outages that disrupted banking services. According to a letter sent to MPs, the bank expects to pay between £5 million and £7.5 million to compensate customers for the "inconvenience or distress" caused by several days of disruption earlier this year. The outages, which began at the end of January, were caused by "severe degradation" in the performance of Barclays’ mainframe computer, a critical system used for bulk data processing. This malfunction led to the failure of 56% of the bank’s online payments. When considering all outages over the past two years, from January 2023 to February 2025, the total compensation could reach up to £12.5 million, making it the largest payout by a financial institution in that period.
The Widespread Impact of IT Failures in Banking
The issue of IT outages in the banking sector is not isolated to Barclays. An investigation by the Treasury Committee revealed that the nine top banks and building societies in the UK experienced a total of 803 hours of unplanned outages over the past two years. This staggering figure translates to 33 days of cumulative downtime, consisting of 158 individual IT failures. NatWest topped the list with 194 hours of service disruption, followed by HSBC with 176 hours. These outages have left millions of customers unable to access essential banking services, with the most recent disruptions coinciding with payday, exacerbating the inconvenience for many.
Why IT Failures in Banking Are Becoming a Recurring Issue
Banks have identified several common causes for these IT failures, including problems with third-party suppliers, disruptions caused by system changes, and internal software malfunctions. These issues highlight the vulnerability of the banking sector’s aging technology infrastructure. The increasing reliance on outdated mainframe systems, which are often decades old, poses a significant risk to the stability of banking services. As the demand for digital banking grows, the strain on these legacy systems intensifies, making them more prone to failure. The recurrence of such outages underscores the urgent need for modernization and investment in more robust technology.
The Human Cost of Banking Outages
While the financial impact of these outages is significant, the human cost should not be overlooked. Customers who rely on online banking for daily transactions, bill payments, and financial management are often left stranded during these disruptions. The stress and inconvenience caused by the inability to access funds or manage finances cannot be overstated. For vulnerable populations, such as those living paycheck to paycheck, these outages can lead to missed payments, late fees, and even financial penalties. The compensation paid by banks, while necessary, often does little to mitigate the immediate distress caused by these disruptions.
Calls for Greater Transparency and Accountability
The Treasury Committee has called for greater transparency and accountability from banks regarding IT outages. Customers have a right to know the extent of the disruptions and the steps being taken to prevent future failures. Banks must also be held accountable for ensuring the reliability of their services, particularly as they continue to push customers toward digital banking. The committee has requested data on the most recent outages, which affected millions on payday, to better understand the scale of the problem and push for meaningful solutions. Greater scrutiny and oversight are essential to protect consumers and maintain trust in the banking system.
The Path Forward: Modernization and Investment
To address the root cause of these outages, banks must prioritize the modernization of their IT infrastructure. This includes transitioning away from aging mainframe systems to more modern, resilient, and scalable technologies. While this process is complex and costly, the long-term benefits of improved reliability and customer satisfaction far outweigh the initial investment. Additionally, banks must invest in robust cybersecurity measures to protect against potential threats and ensure the integrity of their systems. By taking these steps, banks can reduce the frequency and impact of outages, restore customer trust, and maintain their reputation as reliable financial institutions. The future of banking depends on it.
