Short-term pain, long-term digital gain for TSB

The United Kingdom’s TSB had been busy positioning itself as a lean, mean challenger to the tired, flabby Big Five banks (HSBC, Barclays, Lloyds Banking Group, Royal Bank of Scotland Group and Santander UK).

“We are building a bank for the 21st century, with digital at its heart,” Carlos Abarca, Chief Information Officer, TSB told me last year.

As part of that, it was migrating to the Proteo4UK IT platform. “This will not only liberate TSB from our current legacy systems but also make us more agile,” he said. “It will accelerate our ability to make banking better for all UK consumers and provide opportunities for us to become more innovative in responding to our customers’ evolving banking requirements. Put simply, we will be a digital business that just happens to be a bank.”

When I brought up the fact that platform upgrades are a massively costly, time-consuming and risky enterprise, Abarca responded:

“We have the experts in our corner; we know what we’re doing and we have the right people for the job. For example, we’ve had more than 200 TSB Partners working on migration since 2016 and around 800 software engineers working on building the new banking platform.

“We’re using 70,000 different test cases to make sure everything works as it should. Building and testing our new banking platform will take around two million hours of effort – that’s equivalent to 1,200 years for one person.

And yet look where we are now. TSB is currently facing the wrath of angry customers, a hostile media and, as I write this, a furious Treasury committee.

The latter flagged up a massive disconnect between TSB’s take on recent events (‘everything is fine now. Move on, please, nothing to see here’) and the view from MPs’ constituents, without banking services for several days.

Nicky Morgan told CEO, Paul Pester: “What we are hearing is the most staggering example of a Chief Executive who seems unwilling to realize the scale of the problem that is being faced.”

Nevertheless, the long-term impact is likely to be minimal, believes Daoud Fakhri, Principal Retail Banking Analyst at GlobalData.

He points out that, in 2012, RBS Group suffered a catastrophic IT failure, far more serious than that experienced by TSB, which left customers of RBS, NatWest, and Ulster Bank without their salaries and unable to make or receive payments for several days.

However, RBS did not see a significant number of customers defect to its rivals, and the incident eventually passed into history with little lasting impact upon its reputation.

‘‘TSB can, therefore, take comfort from knowing that only a few of its customers will ultimately switch providers and that once the migration issues are finally resolved, it will be better placed than before to offer improved online and mobile services to its customers. This is definitely a case of short-term pain, long-term gain,” he says.

I would have to agree. Despite the rise of various cool new entrants like Monzo and Starling, Brits remain reluctant to switch providers, even when they go wildly off track like TSB. It will ride out the controversy and ultimately be better placed to thrive in these digital times.