TSB, willow and wheezing tech: How banking has fallen behind

1 May 2018

TSB banking customers have had a nightmare couple of weeks; unable to access accounts, check balances, and make payments. This is after a huge re-platforming exercise, which went horribly wrong.

Chief executive Paul Pester has been lambasted on social media for falsely claiming issues were fixed on a number of occasions. 

As such, the bank’s spin doctors have rushed in to waive overdraft and interest fees for April and to raise the interest rate on the Classic Account from 3% to 5%. This will apparently cost the bank £20 million. But with maximum balances of £1,500 eligible for interest this may only equate to an extra £2.50 a month for customers. Which will really placate people who can't pay their bills and have spent hours on hold to the bank... 

High street banks' technology is wheezy, old and it needs upgrading across the board. But this is not a new story. We make radical changes to our banking system every 100 years and the consequences have always been painful. 

In the 1830s, we moved from tally sticks to paper ledgers. Tally sticks were made from willow. The debt was written on the stick which was then split in half. The debtor would keep half which was called the ‘foil’. The creditor would retain the other half called the ‘stock’. Willow has a very distinctive and specific grain and the two halves would only match each other. People soon realised that if you had a stick showing that the Earl of Crumpet owed you £5, then your half of the stick was worth £5 in its own right. 

Clearly having mountains of willow sticks knocking about has its limitations and, in the 1830s, banking moved on to paper ledgers. The Exchequer had to get rid of excess of wooden tally sticks and some bright spark [get it?] decided to burn them in the basement of the House of Lords. The blaze got out of control and it destroyed both Houses of Parliament. Banking upgrades have never run smoothly. 

Over a century later, the paper-based ledgers were replaced by big old IBM mainframes [computer systems] in the 1960s. At that time, banks were the early adopters of technology. Innovators. Fast-forward to the '80s and the investment banks snapped up the brightest engineers with hefty salaries and promises of gold. 

Today it’s a different story – welcome to cost-cutting and the big banks outsourcing technology as talent is lured by the fresher fields of blockchain, fintech, and challenger banks.

Our banks need to compete with the nimble, shinier challenger banks and global tech firms. But the technology which made them innovators in the 1960s makes them a wheezing tanker today. Modern businesses such as Facebook can do a ‘rolling upgrade’. This is where they move pockets of people over to the new systems at a time. The irony is that it is precisely that lack of flexibility that is causing the banks to roll out these platform upgrades in the first place. 

Banks have nothing without consumers’ trust. My word is my bond. Trouble is, in a paper-free world where the only record we have of our money is some pixels on a screen, when this goes wrong the trust is broken.

Customer outrage from TSB users is reminiscent of RBS’s 2012 nightmare when millions were unable to access accounts. I don’t think this will be an isolated incident and we will hear many similar stories as the IBM-powered beasts of the '60s try to lumber into the new world, with outsourced technologists struggling to control them.

Maybe it’s time to go retro and bring back the tally stick? Or is blockchain just the digital version of two willow halves? 

If you’ve been affected by the TSB fallout, you can claim for any financial loss, fines or penalties incurred as a result. Any impact on credit ratings should also be reversed. Complain to the bank first and follow up with the Ombudsman as a last resort. 

Holly Mackay is the chief executive of investment guidance website BoringMoney .