TSB split from Lloyds in 2013. To save itself money, the company also decided to split its computer systems and move 1.3 billion customer records CARL COURT/AFP/Getty Images

Wednesday, April 25 was meant to be payday for the dozen employees of Wellington Care, a subsidiary of the Hull, East Yorkshire and North East Lincolnshire branches of Mind, the mental health charity.



Computer glitches affect all businesses, so it wasn’t overly concerning when the charity’s finance director had difficulty logging into its business bank account that afternoon to ensure everyone got paid on time. “It kept chucking us out and giving us error messages,” explains David Smith, Wellington Care’s chief executive.

After multiple attempts the charity managed to get into its account and set up the payroll as normal. But when staff reached the point of confirming the payment, the whole system went down and an error message appeared.



For a year, the charity had banked with TSB, which since April 22 had been in meltdown after a bungled IT migration that had affected 1.3 billion customer records. It was, unbeknownst to Smith, an almighty mess.


Smith had employees to pay, some of whom live paycheque to paycheque. Calls made to TSB’s helpline that night got stuck in an endless queue. For the first hour of work on Thursday morning, staff at Mind spent their time in a queue on the phone to TSB, until they were advised that they’d be able to make payments from their local branch.



Smith and his finance director walked the 15 minutes from their office in Hull to the branch on the corner of the city’s Jameson Street, ID in hand, to make payments. “When we got there, they were queuing all the way to the door.”



The pair took their place in the queue and waited half an hour to see a cashier, who then told them they couldn’t access the system themselves.

“Because of the problem with the system,” says Smith, “the cashiers couldn’t transfer the cash they’d got in the building from the strong room to the cashier’s desks. It was surreal.” Instead, the cashiers scrabbled to pull together as much of the £12,000 wage bill Mind had to pay while still leaving enough for day-to-day banking within the branch. Smith left the branch with just around £2,500 in banknotes.

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The situation was being replicated up and down the country: TSB customers struggled to make payments, pay off bills, or simply access their account without being confronted with someone else’s transactions or a miraculously vanished mortgage. As the scandal entered its second week, TSB warned customers of phishing emails and texts trying to steal their banking details. And though the issue first manifested itself on the evening of Sunday, April 22, TSB’s problems started long before.

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Two weeks before Christmas 2017, 1,800 Banco Sabadell managers – many of them in the regulation dark suit and slightly metallic blue tie – gathered at Barcelona’s Palacio de Congressos de Cataluña, a soulless, sand-coloured square building in the heart of the city’s business and financial district, on Avinguda Diagonal.



The day was a backslapping session, filled with impenetrable management speak. Those in attendance had to sit through the Spanish bank’s chairman, Josep Oliu, a bald sexagenarian with expressive eyebrows jumping out from behind thick black-rimmed glasses, uttering platitudes like, “We must maintain our leadership in the SME segment, with a competitive and systematic commercial offer which is relevant, consistent and effective.”

Attendees would be forgiven for not catching a small passage of words in amongst the corporate speak, delivered by Banco Sabadell chief executive Jaime Guardiola, about TSB, the small British bank that the Spanish conglomerate bought for £1.7 billion back in March 2015.



Guardiola, 61 and with tight curls of greying hair, was feeling buoyant about the imminent start of a process to unpick TSB’s IT systems from Lloyds Banking Group, to whom TSB had remained technically tethered ever since their breakup in September 2013. The project would see the data of all of TSB’s UK customers moved out of a hastily-cloned version of Lloyds’ IT systems, an inconvenience for which TSB was paying Lloyds £100 million per year, and onto its own proprietary system. The switchover would be carried out using a new version of a system Banco Sabadell had developed back in 2000, originally called Proteo and later renamed Proteo4UK.



“The integration of Proteo4UK is an unprecedented project in Europe, a project in which more than 1,000 professionals have participated,” Guardiola told the attendees. “It would offer a significant boost to our growth in the United Kingdom.” In all, 2,500 years-worth of labour had been put into the project, he added.



But testimony from an insider working on the Proteo4UK migration reveals that Guardiola’s speech was full of bluster. When he took to the stage in Barcelona last December, the TSB migration (which was meant to take 18 months to deliver) was already behind schedule. And it was costing the company money.



But no one – neither Guardiola, Oliu, TSB’s British chief executive Paul Pester, who’d turn 54 a month later, nor the 1,800 people sat in the stalls at Palacio de Congressos de Cataluña – could envisage what would happen a few months later, when TSB was brought to its knees by a crippling IT outage affecting around 1.9 million of TSB’s 5.4 million customers who use internet and mobile banking.

Before things went wrong, Banco de Sabadell's CEO Jaime Guardiola (left), called TSB's banking system an "unprecedented project in Europe" LLUIS GENE/AFP/Getty Images

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Banking systems are almost as low-tech as they are complex. They can be bodge jobs: antiquated systems creaking under the weight of an ever-churning, ever-expanding customer base. According to a TSB insider who spoke to The Guardian, TSB’s system, inherited from Lloyds Banking Group, is particularly sclerotic, not least because it had the scar tissue of multiple prior mergers and was unsuitably large for a bank with a relatively small customer base.


The last truly catastrophic incident to hit a bank was in 2012, when 6.5 million customers at Natwest, Ulster Bank and Royal Bank of Scotland were unable to access their accounts for three weeks in June and July. For that outage, the bank was fined £56 million by the Bank of England and the Financial Conduct Authority.



And when they do collapse, they tend to do so dramatically.



The first indication that something was wrong with TSB’s came around 18:00 on Sunday April 22 when the bank reopened public access to its systems after 50 hours of downtime. People began tweeting that they could see other people’s transactions, or that their numbers simply didn’t add up: people claimed entire mortgages had been written off, or small purchases had tipped their account into massively into the red.

Banco Sabadell, owners of TSB, seemed to have little indication that anything was wrong, however. The morning after customers first reported seeing each other’s account details, on April 23, Sabadell published a press release (which has since been taken offline), hailing the successful completion of the TSB technology migration.



“With this migration, Sabadell has proven its technological management capacity, not only in national migrations, but also on an international scale,” said Oliu in the statement. “The new Proteo4UK platform is an excellent starting point for the organic growth of the business and the improvement of TSB’s efficiency.”



Precisely what went wrong with the TSB migration is still not fully understood: though an insider has outlined what is believed to have happened to The Guardian, TSB has not released an official statement, and declined to speak to WIRED about the technical details behind the issues. Individuals who claim on LinkedIn, Facebook or Twitter profiles to work for TSB on a full-time or contract basis on the software side or the Proteo4UK migration project did not respond to requests to comment.

“The conversion of the systems – the data and the interface accessing the data, which links up to the banking system – clearly has not been well-tested before it went online,” says Shujun Li, a professor of cybersecurity at the University of Kent’s School of Computing. "The scale of the problem we saw is incredible. It’s impossible if they had done systematic testing of the system. For me, it’s clearly a case of management, rather than purely a technical problem.”

That said, Li believes there are parallels that can be drawn with another major business supply failure of recent times: KFC's chicken crisis. “It’s nothing more than about switching to a new supplier without understanding what the new supplier can and can’t do,” he says. “That’s what caused the problem.”

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Peter Macdiarmid/Getty Images

Brian Lancaster, of BLMS Consulting, worked at HSBC overseeing the technical departments responsible for the bank’s IT systems. Before this he spent 13 years at IBM. “The big thing is how did they not spot this problem on Sunday when they were testing the system?” Lancaster says of TSB's problems.



Standard banking practice after making a technical IT change is to then undergo verification testing to make sure the change that’s been made doesn’t throw up new problems. According to Lancaster, these tests are rigorous, and the decision to then allow the system to go live to customers is not taken lightly – not least because once you dig yourself into a hole, you have to keep digging.



“It’s very hard to go back once you get further banking transactions going through the platform,” he says. Theoretically it would have been possible to extract all the transactions made on the new system and port them back to the old Lloyds-run system – but doing so is easier said than done, not least when there’s the possibility of fraudulent transactions: not all customers who had access to other people’s accounts are likely to have been as moral as most.

The likeliest reason Lancaster can think of for TSB reopening access to online and mobile banking at 18:00 on Sunday with an error is that it thought the issue was so minor it would be able to fix it that evening while customer volumes were low before the Monday morning rush – then realised the issue was bigger than first thought. That or TSB had absolutely no idea there was an issue at all.

“It seems like because they were under time pressure, because they couldn’t deliver, they seem to have made their customers unhappy,” says Li.



Among those unhappy customers is wedding photographer Dru Dodd, who has been a TSB customer since before the bank existed. He set up his account with Lloyds at the age of 16, before it merged with TSB and was subsequently forced to split. Because his local branch became a TSB, he was orphaned into the bank. “It’s always had an air of banking on the hoof,” he says. “There are a lot of things it kept from Lloyds. While Lloyds has advanced, TSB has stayed the same.”

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When couples book Dodd for their wedding, he takes a initial booking fee then a final balance just before the wedding. He’s had couples contacting him saying they’ve paid their booking fee and wanting to confirm he’s received it, but he’s been unable to do so. “It’s making me look quite unprofessional,” he says.



Whether the decision to go ahead with a system that seemingly contained a fatal flaw within it was the result of human error, bravado and the belief that it could quickly be fixed or pressures from above to complete a project that was already late and costing TSB money will only come out when the authorities conduct their investigation into what happened. The bank, for now, is keeping quiet.



Last Wednesday, as The Daily Mail's front page castigated TSB as a “Totally Shambolic Bank”, and the company had to admit that its internet banking was only working at half its capacity despite chief executive Paul Pester tweeting that normal service had been resumed, TSB advertised for applicants for its head of infrastructure on LinkedIn. “We’re TSB, and we’re different from other banks,” began the advert, which looked for individuals who had the “ability to cope in a technically complex and fast-changing environment".



Since then, things have not got any better for TSB, which has the nickname amongst some in the banking industry of “the piggy bank” due to its perceived lower status. Pester told BBC Radio 5 Live that the bank was “on its knees”, and that he’d called in IBM for outside help. He wasn’t overstating things.



The IT team working on the Proteo4UK migration will have spent most of the weekend during which the transfer was meant to take place labouring to make sure everything was right. The telescoped time period in which they had to complete the move – ready for banking to resume on Monday morning – will have meant long hours.



When they, their customers and the press began to recognise that something wasn’t right, the already-stretched workers will have had to double down on their labour. “Their technical teams will have been working pretty much round the clock and there’s a limit to how much people can do that,” says Lancaster.



IBM will have been brought in, he reckons, for a number of reasons, “It’s the level of expertise they bring, and it’s also simply bringing in fresh eyes to deal with the situation,” he explains. Troubleshooting an issue that manifests itself in different ways on the bank’s numerous servers is like finding a needle in a haystack – and weary, bleary eyes aren’t the best at doing so.



Most troubling, though, is that even bringing in IBM’s added firepower seems not to have solved the problem. Late on Friday afternoon, Lancaster sounded a note of caution. “I’d be quite worried if they come out of the weekend and still haven’t solved it,” he said at the time. At the time of publication, TSB is yet to restore a full service to its customers.

TSB chief executive Paul Pester, who has apologised after IT problems ravaged the bank's systems Nick Ansell/PA Wire/PA Images

Even when the problem is solved and fixed, and the mountain of complications that have resulted from other people being able to access accounts they shouldn’t, the missed paydays and loan repayments, the overdue credit card bills are all remedied, TSB’s woes will not be over.



The Financial Conduct Authority (FCA) and Prudential Regulation Authority will be investigating the impact the more than a week of chaos has had on TSB customers – and the FCA has the ability to mete out unlimited fines. TSB notified the Information Commissioner’s Office (ICO) when it became clear that customer data could be accessed by individuals in ways it shouldn’t have been.



For the ICO’s likely punishment, look to the precedent it set with TalkTalk, says Dr Heather Anson of DigitalLawUK. “They ended up with the largest fine to date” – a £400,000 slapdown from the regulator. “In one respect they are incredibly lucky that this happened now as opposed to after May 25,” explains Anson. Currently, TSB will be investigated for any breaches of the Data Protection Act 1998, rather than the beefed-up General Data Protection Regulation (GDPR), which come into force at the end of the month. The ICO will be asking what TSB did to prevent this situation happening, what they did to mitigate the situation, and how they’re going to remedy the issues of data leaks.



But besides the potential fines, the sanctions and the financial losses from this past week and a half, the reputational damage to TSB is enormous. “This is one of my frustrations,” says Smith from Wellington Care. “TSB keep saying they’re going to be compensating people.”



Bank chief Pester has said he’ll waive overdraft fees and any associated charges for the month of April, and that current account customers will see a bump in interest rates for their money from three per cent to five per cent. Financial analysts estimate that’ll cost between £25 million and £30 million.


Last year, 1,000 customers a week walked into a TSB branch or logged on online and set up a new account. It was, Pester said in February, “a real vote of confidence in TSB, as the bank continued to grow and our high-tech transformation really gathered pace”. The question now is how many customers will they have lost as a result of a week’s worth of chaos.

One of them is wedding photographer Dodd. “I’ve got a good bit of a house deposit saved up in a savings account with TSB, but I’ve decided I’m just going to pull my personal account and my business account and go to Barclays,” he says. He’s not moved by the five per cent interest rate offer. “The five per cent is only on a balance of up to £2,000, which is not that great an amount of money. And the account used to be five per cent anyway,” says Dodd. “It’s a bit of a ham-fisted gesture, if you ask me.”



Smith is also considering his future with the bank. “I don’t just want another 0.00001 per cent interest on a meaningless interest rate,” he says. “The real cost of the disruption this has cost to us is significantly more than the fees someone might incur because their payments have been late coming out the bank account.”

And with seemingly no fix on the horizon, the woes will continue for TSB and its customers. “One of the services we run is a supported living service for people with mental health problems and learning disabilities,” says Smith. “Many of our support workers who work in that service are paid a living wage, but it’s not full-time work. People need that money. They’re relying on that money hitting their bank account, and it’s not going to; it’s going to be delayed.” For how long is anyone’s guess.