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Banking: do customers really switch? A story from TSB.

In April 2018, TSB in the UK moved their core banking system from Lloyds to Banco Sabadell (TSB is a subsidiary of Sabadell). The move was made for good commercial reasons as TSB were paying a substantial amount of money (about £200m per annum) to Lloyds for the use of their systems. In addition, post-migration, TSB were expecting to receive a large part of a funding package being handed out by RBS under government direction, including £425 million to aid investment in business banking plus £350 million to encourage account switching.


Unfortunately, despite months of preparation, the migration was a disaster. Approximately 5 million customers were moved to the new platform. After one week half of the online banking customers could not login. Curiously, reports of access through their mobile application was better with only 10% locked out.


After a full week of problems, TSB claimed that their systems were up and running, in spite of the fact that many customers could not access their accounts. This rapidly became a PR disaster with the bank CEO joining in the "up and running" claims on Twitter and in a meeting with the Commons Select Committee.


The problems continued for six weeks without being fully resolved. To reiterate the numbers, 5.2 million customer accounts were moved, 1.9 million could not access their account on the weekend of the move and many customers were unable to access their accounts one month later. TSB received just under 136,000 complaints and have admitted that 1,300 customers had money fraudulently stolen from their accounts.


In their mid-year financial report, the bank said savings balances fell by nearly £1bn and the costs to fix the migration issues came to £176 million. This was made up of £115.8m in refunds, £30.7m to fix “operating defects” and £29.9m in lost income after it waived fees and charges to customers. But the total amount is likely to be higher after TSB revealed it had so far resolved only a third of the 135,403 complaints it received at the time of the report. And these figures do not include the possible fines from the Information Commissioner’s Office, Financial Conduct Authority or Prudential Regulation Authority.


My question is "how many people closed their account as a result of this"?


The answer is about 26,000 according to TSB's report. But! 20,000 new accounts were opened in that same period.


So to put that in percentage terms, 19% of the clients that complained closed their account. Or 1.37% of the 1.9 million who suffered some access issues after the migration. But those figures do not take into account the number of new accounts opened.


If you want to know the propensity of people to switch banks, those are the numbers.


P.S. TSB hired Slaughter & May to perform a complete investigation into the migration. The first part of the report will be published soon. I will publish another post once I have had a chance to review.


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