Featured Article : Banks to Pay Millions After IT Failures Leave Customers Stranded

UK banking customers who have faced repeated IT failures are set to receive millions in compensation, following a damning Treasury Committee investigation into the scale and impact of these outages.

Nine Banks

The inquiry revealed that in the past two years alone, nine major banks and building societies have suffered more than a month’s worth of system failures, leaving millions unable to access their money when they needed it most.

How Big Is The Problem?

The inquiry revealed that between January 2023 and February 2025, major high street banks (including Barclays, HSBC, Lloyds, Nationwide, Santander, and NatWest) collectively experienced at least 803 hours of IT outages. That’s more than 33 days of service disruptions, affecting customers’ ability to make payments, transfer funds, and in some cases, even access their own accounts.

To make matters worse, some of the most disruptive outages occurred on key dates, including payday, adding to the distress caused. For many, these incidents resulted in late bill payments, missed wages, and even the inability to complete major transactions – a situation that has been described as ‘deeply unsettling’ by campaigners.

Many Living Pay Cheque to Pay Cheque

Commenting on the findings of the report, Dame Meg Hillier, Chair of the Treasury Committee, did not hold back in her criticism of the situation, stating:  “For families and individuals living pay cheque to pay cheque, losing access to banking services on payday can be a terrifying experience. The fact there has been enough outages to fill a whole month within the last two years shows customers’ frustrations are completely valid.”

Which Banks Are Paying Out and How Much?

As scrutiny on the sector intensifies, it seems that some banks have now set aside millions to compensate affected customers. Here’s what each bank is paying and why:

–  Barclays … The worst-hit bank in the report, Barclays is expected to pay between £5 million and £7.5 million for inconvenience and distress caused by various outages, with the total amounting to £12.5 million over the past two years.

–  Bank of Ireland … The second-largest compensation payout, with £350,000 being distributed to impacted customers.

–  NatWest … Has recorded 13 major incidents and will be compensating customers £348,000.

–  HSBC … With 32 separate IT failures, HSBC has set aside £232,697 in compensation payments.

–  Lloyds … Customers will receive £160,000 following 12 incidents of service disruption.

–  Nationwide … The building society has paid out £77,452 due to system failures.

–  Santander … Despite 24 incidents, its compensation stands at just £17,000.

–  AIB … Paying out a nominal £590 in compensation.

The scale of Barclays’ payout alone shows the gravity of the problem, particularly given that its most recent failure in January left 56 per cent of online payments failing on payday, with some customers unable to complete house moves and others left stranded without funds.

What It Could Mean for Customers

For banking customers, these payouts are likely to come as both a relief and a frustration. For example, while the compensation acknowledges the distress caused, it’s likely to do little to restore confidence in the reliability of banking services. Many customers have already expressed concerns that IT failures are becoming more frequent, rather than less, despite advances in technology.

Although the payouts may be welcomed, customers will still be aware that unless something is done about the failing IT systems from underlying legacy banking infrastructure that keeps crashing, they’re still at risk of it happening again.

Unclear How to Claim Compensation

While Barclays and others have vowed that no customer will be left out of pocket, the process of claiming compensation still remains unclear for many. Some have already lodged formal complaints, while others may need to wait for banks to proactively contact them about payments.

The Wider Impact on the Banking Industry

This wave of IT failures, and the subsequent compensation payouts, has put the UK banking industry under renewed pressure to modernise its digital infrastructure. Thankfully, the Treasury Committee has made it clear that more needs to be done to reduce the frequency of these failures, and banks are now being urged to make urgent investments in:

–  IT resilience  – ensuring systems are robust enough to handle peak usage periods.

–  Third-party oversight  – many failures stem from external suppliers, raising questions about regulation.

–  Customer communication  – better transparency when outages occur and clearer processes for compensation.

The government has already hinted that further regulation may be on the horizon, with a Treasury spokesperson stating:  “We are working with the financial authorities to regulate third-party suppliers, as well as considering whether the banks are doing all they can to provide the level of service customers expect.”

What Does This Mean for Your Business?

The banks now find themselves at a crossroads. While the compensation payments acknowledge the impact on customers, they do not solve the deeper issue of unreliable IT infrastructure. For customers, the payouts may soften the blow, but they will do little to restore long-term confidence unless meaningful action is taken to prevent future disruptions.

For businesses, the implications of these failures are always far-reaching. For example, many companies rely on seamless banking operations to pay staff, manage cash flow, and complete critical transactions. Therefore, when banking systems go down, the knock-on effects can be severe, potentially leading to delayed wages, operational disruptions, and financial uncertainty. Small businesses, in particular, can struggle to absorb these setbacks, making banking reliability an essential component of economic stability.

The industry’s response to this crisis will shape the future of banking in the UK. If banks commit to modernising their IT systems and prioritising customer service, they may yet rebuild trust. However, continued failures could prompt stricter regulatory intervention, higher penalties, and increased competition from digital-only banks that have so far proven more resilient. With technology at the heart of modern finance, institutions that fail to adapt may find themselves losing not just customers, but also their position in the market.

As pressure mounts, it seems that banking in the UK is at a kind of turning point, and the coming months will determine whether these institutions can step up to meet the expectations of the businesses and individuals who depend on them every day.