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In letters to the Treasury Select Committee published last week, Nationwide, HSBC, TSB and Lloyds Bank revealed the level of compensation they face for IT outages affecting their banking services earlier this year.
The banks wrote in response to a series of questions posed by the committee relating to an outage on February 28, 2025.
Nationwide said it paid out £84,341 in compensation to customers, Lloyds said it expects costs of £16,000, TSB said compensation costs were £12,439 and HSBC expects to pay out £1,250.
In all cases, the outages were caused by IT failures and not malicious cyber attacks.
This was not the first time this year the Treasury Select Committee has sought answers from UK banks regarding outages in their systems.
In February 2025, the committee wrote to the CEOs of the nine largest banks and building societies in the UK demanding detailed information on IT failures that have disrupted customer services over the past two years.
The move was triggered by an outage experienced by Barclays, which began on the morning of January 31, 2025, and lasted into the weekend of February 1–2.
In the bank’s response to the Treasury Select Committee about the incident, Barclays UK CEO Vim Maru confirmed that the outage was caused by a software problem, rather than a cyber-attack or other malicious activity.
“Based on our investigations so far, the root cause of the incident was a software problem in our UK Mainframe operating system,” Maru said.
“This problem caused progressively severe degradation of Mainframe processing performance through a substantial part of January 31 and into the following day.”
Barclays, which has more than 13m digitally active UK customers, said it has initially estimated that it will pay out between £5m and £7.5m to those affected by the incident, significantly overshadowing the costs of the more recent outage.
Traditional methods back
As Barclays digital systems went down, customers were forced to return to traditional methods to access banking services.
“On Monday, branch footfall was [approximately] 18 percent higher and counter transactions were 14 percent higher than a typical day, and our message channel was 45 percent over forecast with long wait times for customers to be messaged back,” Maru said.
Barclays also saw some instances of first-party fraud, with some customers attempting to take advantage of the incident, Maru disclosed.
Looking back over previous incidents, the bank estimated that it had paid less than £5m in compensation to its customers due to IT failures in the last two years.
The select committee revealed that there have been more than one month’s worth of IT failures at major UK banks and building societies in the past two years.
A spokesperson for UK Finance told Vixio, “The banking industry invests significantly in the resilience of their systems and technology. The ongoing investment means incidents [that] cause significant disruption happen very rarely."
“Operational resilience is, and will continue to be, a key focus for banks, government and regulators. The industry will continue to work closely with policymakers to ensure we maintain strong operational resilience.”
Scale of disruption
The Barclays outage and the more recent incident affecting the four other UK banks lay bare the scale of disruption that can be caused in payments systems if digital technology breaks down either by accident or due to malicious activity.
Incidents such as these will increase concerns about over-reliance on IT infrastructure and the disappearance of cash from modern economies.
There are already worries around financial inclusion, with the Treasury Select Committee recently warning that government inaction in tackling declining cash acceptance could lead to a “two-tier society”. According to the FCA, more than 1m people in the UK do not have a bank account.
In addition, the outage experienced by Barclays in January 2025 demonstrates another threat from the trend towards "cashlessness" — what happens when systems go down?
It highlights the importance of operational resilience, and financial institutions should be examining their own business continuity planning and cyber resilience.
Finally, such incidents also fuel concerns about payment sovereignty.
In March a global outage at Mastercard affected customers in 65 countries, including the US, Japan, France, Italy, Thailand and Australia.
A report by the European Central Bank (ECB) on the state of the European card payments market suggests that the EU’s continued dependence on international card schemes and foreign-owned payment processors is a threat to the bloc’s financial sovereignty.
Card payments accounted for 54 percent of all non-cash transactions in the EU in 2023, with nearly 70bn transactions recorded.
This led some to argue for the importance of Europe developing homegrown alternatives — including, potentially, a digital euro.
Another threat is growing geopolitical uncertainty and risk, and Sweden's central bank has argued that the country needs to focus on the resilience of its payments system.
