Banks to Pay Millions After Month’s Worth of IT Outages

Recent investigations have revealed a concerning trend of IT failures plaguing major banks and building societies in the UK. Over the past two years, these institutions have accumulated a staggering 803 hours – equivalent to 33 days – of outages, disrupting services for millions of customers^{[1], [2]}. One might even say it’s enough to make one consider keeping their cash under the mattress! (Just kidding, of course.)

Parliament’s Treasury Committee launched an inquiry to investigate the impact of these outages on customers, demanding answers from major banks about the frequency, duration, and causes of these disruptions^[3]. The investigation revealed that nine major financial institutions, including Barclays, HSBC, Lloyds, Nationwide, Santander, NatWest, Danske Bank, Bank of Ireland, and Allied Irish Bank, have experienced at least 158 IT failure incidents between January 2023 and February 2025^{[1], [2]}. Even the financial giants appear to have their “computer says no” moments.

These outages have been attributed to various factors, including problems with third-party suppliers, disruptions stemming from system changes, and internal software malfunctions^{[1], [4]}. Worryingly, the report also highlighted an increased likelihood of “clustered incidents” due to the interconnected nature of financial IT infrastructure^[1]. This means that a single failure at one institution can have a ripple effect, triggering disruptions across the entire sector. Additionally, the report acknowledged the potential role of cybercriminal activity in the recent surge of outages, suggesting that malicious actors could be exploiting vulnerabilities in banking systems^[1].

One of the most significant incidents occurred at Barclays between January 31 and February 2, 2025. This major IT outage, lasting for three days^[5], prevented customers from accessing their accounts and making online payments. Barclays attributed the disruption to a critical software problem within its UK mainframe operating system, a core component responsible for processing high volumes of transactions^[6]. This failure impacted 56% of the bank’s online payments, leaving many customers unable to manage their finances effectively^{[5], [7]}.

Adding to the distress, both the Barclays incident and a separate outage affecting Lloyds on February 28 coincided with payday^[7]. This left many customers without access to their wages, hindering their ability to pay bills, transfer funds, or meet essential financial obligations^[7]. The concentration of outages on Fridays and near paydays suggests a potential correlation between planned software updates and increased cybercriminal activity targeting vulnerable systems^[1].

Banks have pledged to compensate those affected in response to the widespread disruptions and mounting customer frustration. Barclays, which has recorded 33 outages over the past two years, has set aside between £5 million and £7.5 million specifically for the January outage^{[5], [7], [8]}. However, when accounting for compensation for all outages over the past two years, including the recent incident, the bank’s total payout could reach up to £12.5 million^[8]. Barclays has also initiated a “proactive remediation effort” to identify and compensate all affected customers, demonstrating a commitment to resolving the issue fairly and efficiently^[4].

Other banks have also committed to compensating customers, with amounts varying based on the severity and duration of the outages. NatWest has paid out £348,000, HSBC £232,697, and Lloyds £160,000^[3]. Nationwide has paid out £77,452, Santander £17,000, and AIB £590^[3].

While banks are not legally required to compensate customers for every IT glitch, the Financial Conduct Authority (FCA) expects them to handle compensation claims fairly and reasonably^[1]. Customers may be eligible for compensation if they can demonstrate that they suffered a direct financial loss or significant inconvenience due to an outage^[1]. This could include late payment fees, overdraft charges incurred due to inaccessible funds, or any direct financial damage resulting from the disruption^[9].

Claiming Compensation

To claim compensation, customers should follow these steps:

1. Gather Evidence: Keep detailed records of any additional costs incurred as a result of the outage, such as bank statements, receipts, or invoices^[1].
2. Contact Your Bank: Lodge a formal complaint with your bank, providing clear evidence of the outage’s financial impact ^{[1], [9]}.
3. Escalate if Necessary: If you are dissatisfied with the compensation offered by your bank, you can escalate your complaint to the Financial Ombudsman Service^[1].

The FCA plays a crucial role in overseeing financial institutions and ensuring they adhere to regulations and treat customers fairly^[8]. While the FCA has not imposed any formal penalties for the recent outages, it has emphasised the importance of banks maintaining robust and reliable digital infrastructure^[8]. The FCA expects banks to prioritise the reliability of their systems and ensure that customers are treated fairly, particularly when disruptions occur^[8].

The Treasury Committee has pledged to request further information from banks involved in the most recent outages, including the Lloyds incident, which is not included in the currently available data^[7]. The committee’s report highlights the need for banks to improve their response times and communication with customers during such crises^[7].

The recurring nature of these outages has raised concerns about the overall resilience of the UK’s banking systems and the potential impact on customer trust^[7]. Experts warn that repeated service disruptions could erode confidence in the sector and prompt customers to seek alternative banking options^[8]. Higher instances of fraud have also been reported in the wake of these outages, as scammers attempt to exploit the confusion and vulnerability of affected customers^[4].

In response to the scrutiny, banks have emphasised their commitment to resolving the issues and ensuring the reliability of their digital infrastructure. Barclays, for example, has stated that it has taken steps to strengthen its systems and reduce the risk of future disruptions^[8]. The bank is investing in infrastructure upgrades and implementing additional redundancy measures to safeguard against future failures^[8]. Other banks have also highlighted their significant investments in systems and technology aimed at ensuring customers have reliable access to their money^[10].

The Treasury Committee has called for banks to provide complete reports on the causes of the outages and the measures being implemented to prevent a recurrence^[8]. Andrew Griffith, chair of the Treasury Committee, stated, “banking services are a fundamental necessity in modern life, and such widespread failures are unacceptable.”^[8]

Looking Ahead

The recent outages have exposed vulnerabilities in the digital infrastructure of UK banks and highlighted the need for a more robust and resilient financial system^[11]. As the reliance on digital banking continues to grow, banks must modernise their core technology and invest in scalable, secure systems that can handle the increasing volume of transactions^[11]. The recently implemented DORA regulation, which focuses on improving cybersecurity and operational resilience in the financial sector, could play a key role in preventing future outages and safeguarding customers from service disruptions^[11].

Synthesis and Conclusion

The series of IT outages at major UK banks has revealed critical weaknesses in their digital infrastructure, causing significant disruption and inconvenience for millions of customers. While banks have pledged to compensate those affected and take steps to improve their systems, the recurring nature of these incidents raises concerns about the long-term stability of the banking sector and the potential for erosion of customer trust.

The Treasury Committee’s investigation and the FCA’s scrutiny emphasise the urgent need for banks to address the underlying issues and ensure the reliability of their digital services. This includes investing in robust infrastructure, improving oversight of third-party suppliers, enhancing communication with customers during outages, and strengthening security measures to prevent cyberattacks.

Ultimately, banks must prioritise customer service and operational resilience to maintain confidence in the financial system and prevent further disruptions that could have significant consequences for individuals and businesses alike. Failing to do so could have far-reaching implications, potentially driving customers away and undermining the financial sector’s stability.