S Poddar
Barclays will pay millions of pounds in compensation to customers after a succession of severe technical breakdowns which left banking services in disarray. The bank puts the total it will have to pay to affected customers at between £5 million and £7.5 million. This was revealed in a recent letter to Members of Parliament (MPs).
The outages, which started towards the end of January, took a few days and occurred at a peak moment. Most of the customers couldn’t access their accounts, right around the time payday was approaching and the deadline for self-assessment tax returns was near. The issue arose due to a large failure of the bank’s online payment platform, with 56% of the transactions going through. Barclays labeled the incident as a “severe degradation” in its mainframe computer, the center of its banking business.
To fix the issue, Barclays’ mainframe vendor has issued a software patch, which is being thoroughly tested. But the overall compensation payment could increase substantially. MPs have been told that Barclays could end up paying up to £12.5 million when all the technical breakdowns between January 2023 and February 2025 are taken into account.
This payment deal is set to be among the biggest awards made by any bank in years. The Bank of Ireland, however, which experienced similar disruptions in service, compensated customers to the tune of just £350,000, marking the enormous scale of Barclays’ failure and cost to its customers.
For affected customers, claiming compensation may not require any action. Some refunds will be issued automatically, while others may require additional verification. Barclays has assured customers that it will reach out to those impacted to ensure they receive the appropriate compensation.
One of the largest issues resulting from the breakdown is the likelihood of higher levels of fraud. Barclays has already seen attempts made by those wishing to take advantage of the situation for personal profit. The bank expects a spike in fraud instances in the near future as probes are ongoing and customers gauge the extent of the damage from the system failure.
In response to these problems, the Treasury Committee has opened an investigation into IT failures in top banks and how they affect consumers. This investigation goes beyond Barclays since the overall UK banking community has experienced a mounting number of technology failures over the last few years.
Recent reports by the committee identified that the UK’s nine largest banks and building societies collectively saw 803 hours of unplanned downtime in the last two years. This equates to around 33 days of service outage, impacting millions of customers. In this time, 158 IT failures occurred, highlighting the continued challenge for financial institutions to offer uninterrupted digital banking services.
Of the banks analyzed, NatWest experienced the greatest amount of downtime at 194 hours, followed closely by HSBC at 176 hours. Barclays’ recent system collapse is not accounted for here but has done nothing to dispel fears about the stability and reliability of online banking systems.
Banking executives and industry experts have cited various reasons for such recurring IT failure. Most of these outages are a result of technical snags from third-party providers, in-house software errors, and maintenance procedures. With increasing e-banking advancements, the need for secure IT infrastructure is as high as it has ever been, which highlights the need for banks to get their act together in terms of technology to avoid such breakdowns.
As the Treasury Committee is increasing its scrutiny of how banks handle IT failures and compensate their affected customers, banks are coming under increasing pressure to enhance their digital resilience. With such a high dependence on online transactions nowadays, banks have to make sure that they are able to deliver stable, seamless service to their customers.
Barclays, along with other big banks, is under mounting public and regulatory pressure to manage these crises more effectively. Whilst pay provides temporary respite, the actual issue is if banks can create stability in an age where online banking is at the heart of business and personal finances.
For millions of consumers, smooth banking services are a key to living their daily financial lives. Beyond the damage to its reputation, Barclays’ handling of this crisis may become a model for banks to respond to such lapses in the future. Fortifying banking IT systems is no longer a choice—it’s a necessity to ensure trust and confidence in digital financial services.
