Fraud surged, losses mounted on IT woes
TSB IT Migration Woes
TSB, which is midway through a challenging and error-prone core banking system migration, tumbled to a pre-tax loss of £107.4 million in H1 of 2018, against a profit of £108.3 million in H1 2017. The company blamed the IT migration – which has cost it £494.4m so far – “and subsequent service disruption” for the loss.
It has received 135,403 complaints since migration, it revealed. The bank has also had to hire 1,800 extra people and redeploy 700 partners.
The botched migration has left customers locked out of accounts and a surge in fraud that has cost the bank £115.8 million in the first half.
TSB is migrating millions of customer accounts from Lloyds Bank systems, which have hosted them since TSB was separated from Lloyds, to a UK version of new Spanish owner Sabadell’s existing core banking system, Proteo. It made the move to cut the annual £160 million hosting fee it has had to pay to Lloyds.
In H1 results announced today, TSB announced costs of £318 million for migration related work to Lloyds (mitigated by £318 in “income” owing to migration off the platform. It also recognised additional post-migration costs and foregone income of £176.4 million .
The bank broke this down into: provision for customer redress, associated remediation resource costs and fraud costs which total £115.8 million; “additional resource and advisory costs to support the remediation of systems and operating defects” of £30.7 million and “foregone income of £29.9 million related to waived fees and charges as a result of service disruption.”
Shifting to Proteo System
Proteo is based on the Alnova retail core banking system supplied by Accenture, but Sabadell has reworked the system and owns the IP.
Carlos Abarca, CIO of TSB, earlier told reporters the new system, Proteo4UK is running out of two new data centres in the UK.
“It is customer centric by design… and enables the open banking revolution. Proteo4UK was built in close co-operation with world-class companies, and has very few legacy systems,” he said. “It is a brand new core banking system for us.”
Following widespread issues, TSB has appointed IBM in a Systems Integration role, to help identify and resolve performance issues in the platform, with IBM reporting directly to the bank’s CEO.
Clive Bellmore, CEO – Europe and Africa, BackOffice Associates said in a written comment to Computer Business Review: “TSB’s costly IT fiasco should act as a stark wake-up call to British businesses to treat data with the respect it deserves, and specifically when migrating data to a new system.”
He added: “Anyone who has gone through data migration knows how complex and fraught with risk it can be. Yet few companies understand the critical relationship between a successful data migration and a successful go-live and sadly TSB isn’t alone. All too often data migration is misunderstood, underfunded, inappropriately resourced and poorly scoped. TSB’s incident is a reminder for organisations to take data migration seriously, after all, it’s one of the top three reasons system implementations fail.”