What Just Happened to UK TBTF Lender Barclays’ Online Banking Services, and What Could It Mean for the Wider World?

“[W]e have this house of cards where you’ve got an awful lot of institutions working co-operatively with each other, but if one messes up the system, then the whole system fails.”

Given all the drama generated by Donald J Trump’s tariff tiff over the past few days, readers could be forgiven for not knowing what just happened at Barclays Bank, one of the UK’s “big four” lenders and one of the 29 “Global Systemically Important Banks”, or G-SIBs, designated by the Financial Stability Board as officially too big to fail. Even some British readers may be unaware of the developments given they did not make it to the front pages of the nation’s newspapers.

So, what happened?

Barclays suffered an IT system outage that lasted almost 48 hours, from Friday afternoon til Sunday morning, leaving many of its customers unable to do even the simplest of things on the bank’s app, online platform or telebanking service including making payments. Then, on Monday morning, just hours after Barclays’ resolved its “technology issue”, Lloyds Bank, another “big four” lender, suffered a four-hour outage that affected not just Lloyds’ online services also those of its subsidiaries, Bank of Scotland and Halifax.

But it was the far longer Barclays outage that caused the most chaos and consternation. This, after all, is one of the world’s most systemically important banks, and its payment system stopped working for many of its customers for close to 48 hours. That is a long time for an IT outage to last, especially at a TBTF lender. Plus, the outage occurred at the worst possible moment for its customers: on the afternoon of the last Friday of the month — aka Payday. It was also the deadline for self-assessment tax returns.

The 5th largest bank in Europe just STOPPED WORKING, on payday, on tax deadline day. The Barclays outage has huge impacts.

Some customers can't pay bills
Others can't meet tax deadline day

This will get expensive.

Barclays is working with the tax service (HMRC) to minimize… pic.twitter.com/T3jgNTZSL7

— Simon Taylor (@sytaylor) February 2, 2025

The banking areas affected by the glitch included Barclays and Barclaycard apps, online banking and services, cards, payments and transfers, branches and telephone banking. More than 600 Barclays customers had reported problems by 1000 GMT on Sunday, including failed payments and incorrect balances being displayed. Presumably, many others suffered problems without reporting them. Some customers were locked out of their accounts altogether.

Many customers took to social media to air their grievances. Some reported being unable to buy shopping for themselves and their young children, pay their bills or withdraw cash. Yet the bank insisted that its ATMs were unaffected.

The bank’s crisis management and communications appear to been found wanting. For example, when an X user called Olive said she had “no access to money” because of the outage, the Barclays UK Help account asked: “Are there any friends or family who can offer support?” When she said there wasn’t and described the reply as “so triggering”, the bank’s X account posted links to the Trussell Trust, a charity that runs food banks, and the Citizens Advice Bureau.

The message was clear: Olive, temporarily, had no recourse to money, through no fault of her own, of course — her bank was just having a “technological” issue — and like anybody in the UK who has no money, her best option was to head down to the local food bank and hope there were still stocks available.

Other affected customers, according to the BBC, included at least two separate instances of home-movers left “effectively homeless” on Friday when their transactions involving funds in Barclays failed to complete, as well as businesses who complained of losing thousands of pounds in rejected payments.

As Reuters notes, “disruption of online services has been a persistent problem for banks in the UK in recent years, and an acute one because lenders have increasingly encouraged customers to bank online to help them reduce fixed costs.”

“Encourage” is an interesting choice of words given that many bank customers had little choice in the matter. Over the past decade, the UK’s big banks, including Barclays, have ripped away the choice of in-branch services for many of their customers through their ruthless cull of branches across the nation’s towns and cities. Since 2015, more than 6,000 bank branches have been closed in the UK. Meanwhile, the number of ATMs has fallen from a historic maximum of 70,000 in 2016 to under 50,000 today.

The trend is ongoing (and is unlikely to change even after this latest outage): last year, Barclays reaffirmed plans to close 99 of its high street sites over the course of 2024 and 2025. For those affected by the bank’s latest round of closures, the good, ahem, news is that Barclays does offer an alternative: so-called “mobile branches” are available through Barclays’ educational and support van for customers in England and Wales.

As the financial analyst, author and pro-cash activist Brett Scott notes, this trend of aggressively pruning branches networks has created a feedback loop that constantly reinforces the impression that people are turning their back on cash when, in actual fact, banks are making it harder and harder for them to access it while bricks-and-mortar businesses are making it harder and harder to use it:

In closing down their branches, or withdrawing their cash machines, they make it harder for me to use those services. I am much more likely to “choose” a digital option if the banks deliberately make it harder for me to choose a non-digital option.

In behavioural economics this is referred to as “nudging”. If a powerful institution wants to make people choose a certain thing, the best strategy is to make it difficult to choose the alternative.

At the same time, it is becoming increasingly clear that banks like Barclays have spent not nearly enough time or money ensuring that the digital platforms they were nudging (or herding) their customers towards are not nearly as reliable or as secure as would be ideal.

In 2018, there was the rigmarole of Banco Sabadell’s botched IT migration of its UK subsidiary TSB — branded the “biggest IT disaster in British banking history. Hundreds of thousands of customers were unable to access their online accounts for weeks on end. Some lost out financially, many saw their credit ratings deteriorate as a direct result. Business customers were unable to pay bills or make payroll and mortgage payments were missed. Over 1,300 customers became victims of fraud attacks.

The crisis cost Sabadell hundreds of millions of pounds, 80,000 customers and one CEO. It was probably a key factor in scuppering BBVA’s takeover of Sabadell in 2020. Since then, the UK’s financial sector, much like Australia’s, has been plagued by bank outages.

The UK’s main financial regulator, the Financial Conduct Authority, has been “deeply concerned” about the increasing incidence of IT outages for over half a decade (though that concern appears to have spurred little in the way of operational improvements). At the FCA’s annual public meeting in 2019, the regulator’s executive director of supervision, Megan Butler, said the number of incidents of “operation resilience breaks” reported in terms of IT failings had increased 300% year-on-year. And this, she said, would probably be “a growing trend”.

And she was right!

In July 2021, the websites of six large banks and building societies — Lloyds, HSBC, TESCO Bank, Bank of Scotland, Halifax and Barclays — were brought down by a global Internet outage allegedly caused by a botched software update at hosting service Akamai. Less than a month later, the apps of five lenders and building societies — Natwest, TESCO Bank, TSB, Santander UK and Halifax — all went down over a period of just a few days. The outage, apparently triggered by a problem with US payments company TSYS, left consumers unable to access their credit card services and account information.

In March this year, a massive outage disabled contactless and mobile payments across Sainsbury’s and Tesco supermarket stores. The hours-long outage took place on a Saturday, causing maximum disruption and loss of business. Then, in July the fallout of the Crowdstrike outage was so pronounced in the UK’s less-cash economy that newspapers in the country actually began warning about the fragility risks of a fully cashless economy. Since then myriad smallish outages have occurred but nothing nearly as big as what just happened to Barclays.

And the overarching message appears to be that regular bank outages is now just part of the new normal; it’s just something we have to put up with. To borrow from Yves and Lambert, let’s just call it the crapification of finance. And let’s not be coy about this: it will be you, the bank customer, that will be left in the lurch. If your bank’s services go down for days on end and you have no alternative sources of funding, you’d better head down to your local food bank, assuming there is one. And if there isn’t, you can always start begging on the streets.

Of course, when the digital revolution began sweeping through the financial system and banks began nudging their customers toward their mobile banking apps, we were never told that it would come at a cost of greater systemic fragility.

Chris Skinner, a financial technology expert and author of The Future of Banking and Digital Bank, suggested in 2005 that digital money will offer a far more secure payment system, especially with the advent of biometric authentication systems. Now that the opposite appears to be happening, Skinner is warning that banks and financial regulators are struggling to keep up with all the technological changes and upgrades that are coming at them. From Yahoo Finance:

Skinner said the vast array of technology systems needed to operate in the modern banking world meant banks have “such a smorgasbord of things they have to work with” that the “competence of keeping up with these changes is really challenging every bank”.

He told the PA news agency that clusters of incidents were also more likely because of the shared financial IT infrastructure and close links between institutions.

Mr Skinner said it meant that situations similar to the CrowdStrike outage in 2024 – where an issue within one infrastructure firm caused a global IT outage – were now more likely in the banking sector.

“If you look at what happened in the US last year (with CrowdStrike), it was like a house of cards,” he said.

“There was a linked organisation that failed, and then other organisations failed on the back end of their failure, and I think that’s where we are today – we have this house of cards where you’ve got an awful lot of institutions working co-operatively with each other, but if one messes up the system, then the whole system fails.”

This applies, of course, not just to the UK but to just about everywhere. In October, Bank of America, another G-SIB, suffered an IT outage that resulted in some customers seeing a zero balance on their accounts. Weeks later, Singapore’s DBS, one of the world’s leaders in digital banking, and Citi, another G-SIB, suffered simultaneous outages caused by a “technical issue” with the cooling system at an Equinix data centre. As Channel News Asia reported, the 14-hour outage prevented 2.5 million payment and ATM transactions from being completed.

Now that bank IT outages have established themselves as a regular feature of the new financial landscape, customers are being advised to take certain measures to minimise their risk of exposure. They include having a second bank account with access to online banking, keeping track of the timing of any outages and taking screenshots of any failed payments or other operations, switching current account to another bank if the outages are frequent, and keeping a cash reserve on hand, just in case.

If these incidents have served any purpose, it is surely as a reminder of the importance of cash whenever technology fails. It is perhaps no wonder that in the UK and other countries, cash is staging a comeback that seemed most unlikely just a few years ago.