UK customers outraged as Natwest and Sainsbury's Bank suffer outage

While NatWest and Sainsbury had outages, this week at the launch of China's first internet-only bank, WeBank, the Chinese premier said that new banks will force existing banks to change – citing lower costs and bigger benefits for small clients, while forcing traditional financial institutions to accelerate reforms.

The obvious assumption behind the Premier's comments is that traditional legacy banks are failing to deliver a quality service in a digital age. With the pressure multi-channel and mobile are placing on systems that were developed on decades-old mainframes, we are increasingly seeing a number of high-profile outages that leave customers without access to their funds for hours (if not days) on end.

This is particularly true in the UK, where we have seen a number of incidents where the technology supporting traditional banks has failed, which has resulted in not only huge fines by regulators, but huge losses for banks.

The most obvious example of this being Natwest – which is owned by parent company Royal Bank of Scotland – which in 2012 suffered a huge IT failure that resulted in a £56 million fine by the Financial Conduct Authority. Since then the company has said that it is investing £750 million over a three year period, over and above its annual IT spend to enhance the security and resilience of its IT systems.

However, yesterday, Natwest customers suffered another failure that led to payments and transfers not being able to be processed online.

Natwest told diginomica that it has been investing heavily in its IT systems and processes since the 2012 incident, making improvements across its batch processing system (the cause of the problems two years ago), its international payments and its mobile banking. It has also built a mirror bank that mirrors its current systems and data for key customer services so that should a system outage occur, RBS can still process customer transactions while it recovers its systems – although didn't seem to kick in for customer online payments this week, judging from the complaints on Twitter.

A spokesperson for RBS said to diginomica:

Between 1:30pm and 6pm on Wednesday some NatWest customers experienced technical issues making payments and transfers using online banking. During this time customers were able to process payments using telephone banking, our mobile app or by visiting a branch. We apologise to customers for the inconvenience this caused.

Here are some angry customers on Twitter, to highlight some of the frustration experienced:

@NatWest_Help Any update on the payments problem ?. I have a bill that needs to be paid by tomorrow.

— Nigel Thain (@nigelthain) January 7, 2015

Unable to make payments AGAIN with @NatWest_Help Sick of this bank and their online banking!

— Emu&Me (@emuandme) January 7, 2015

@NatWest_Help the 0345 number on the website. Payments due by tomorrow but it takes 2 working days to clear onto the card. :-( — SLP (@Seanlpattison) January 4, 2015

@NatWest_Help @kevindunlop The system is still not working and payments cannot be made. Please can you advise when it might be? Christine — Christine Palmer (@HelpMeToCook) January 7, 2015

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• Lloyds banks on digital commitment for growth 
• Optical character recognition takes root in the Royal Botanic Garden Edinburgh's digital archive (diginomica.com)

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 Separately, and earlier on in the week, Sainsbury's Bank customers were unable to use their credit and debit cards for a few hours on Wednesday following an unspecified technical glitch. Interestingly, Sainsbury's Bank was joint owned by Lloyds Banking Group (one of the legacy players) and was using its mainframe systems up until 2013, when it announced that it would buy out the Lloyds share and migrate all of its systems and processes to FIS in a major outsourcing deal – presumably in an attempt to modernise its services.

A Sainsbury's Bank spokesperson told diginomica:

Some customers experienced issues with their credit cards and savings accounts for a few hours on Wednesday. We’ve reassured them that the problem has been fixed and apologised for any inconvenience caused.

Again, here's the reaction on Twitter:

Massive thanks to @sainsburys bank I was left looking like a right idiot in @top shop when my card was declined due to a server fault.

— tony fawcett (@tony4cett) January 7, 2015

Bad start to journey @sainsburys bank credit card declined at petrol station. Sainsbury's bank systems down, thank god for Visa! #tinpotbank

— Nick Murrell (@nick_murrell) January 7, 2015

@Sainsburys Are there issues with your bank systems at the moment? Can't get a balance or withdraw cash on a Savings account

— Mr Napkin Head (@ChrisGN) January 7, 2015

Totally freaked to have my @Sainsburys_Bank / @sainsburys Credit Card refused twice today-why was there no warning of problems? #annoyed

— Jayne Pearce (@jponline2010) January 7, 2015

My take

Banks, just like companies in other sectors, are struggling to keep up with the pace of change being driven by digital technologies.

However, when a retailer's website goes down or its app isn't working, at worst customers aren't going to be able to buy or research some products or services there and then. Hardly the end of the world. But when a bank's services go down, customers could potentially be caught in a very awkward situation without access to their funds.

Huge investments are needed and tighter controls put in place if the traditional players want to keep ahead in the years to come. New banks are forming that are built for a digital age and customers will become frustrated with poor service. With new, easier rules for switching between banks in the UK, the prospect of a digital-first bank may seem more and more appealing.