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Barclays Faces Multi-Million Pound Compensation Payout Over IT Outage

Barclays Faces Multi-Million Pound Compensation Payout Over IT Outage

Barclays is preparing to pay millions of pounds in compensation to customers following a major IT outage that left thousands unable to access their accounts, make transactions, or receive payments. According to a new letter to MPs, the banking giant estimates that it will pay between £5 million and £7.5 million in redress for the disruption caused by the outage earlier this year.

The issue, which struck at the end of January, coincided with one of the busiest financial periods of the year—payday for many UK workers and the deadline for self-assessment tax returns. As a result, countless customers faced delayed payments, failed transactions, and unexpected financial distress.

Technical Failure Causes Major Disruption

Barclays attributed the outage to “severe degradation” of its mainframe computing system—a critical infrastructure used for processing large volumes of financial transactions. The failure affected more than half of the bank’s online payments, leading to customer frustration and significant operational setbacks.

While the issue was eventually resolved, Barclays has since faced scrutiny from regulators and lawmakers over the reliability of its digital banking systems. The influential Treasury Committee, which oversees financial sector accountability, has been pressing the bank for details on how it plans to prevent similar incidents in the future.

Compensation and Customer Redress

The anticipated compensation payout of up to £7.5 million will be distributed among affected customers to address the “inconvenience or distress” they experienced. However, the total financial impact of Barclays’ system failures could climb higher, as the committee has highlighted additional outages dating back to January 2023. When accounting for all disruptions over the past two years, Barclays’ compensation bill could reach as much as £12.5 million.

A Barclays spokesperson stated, “We recognise the frustration this outage has caused our customers, and we are committed to ensuring fair compensation for those impacted. We have taken steps to strengthen our systems and reduce the risk of future disruptions.”

Increase in Fraud Attempts Reported

Beyond the direct impact on customers, Barclays has also revealed an uptick in fraudulent activity linked to the outage. The bank reported instances where scammers attempted to exploit the situation, posing as Barclays representatives to deceive customers into providing personal and banking information.

Cybersecurity experts warn that major IT failures often create opportunities for fraudsters, who take advantage of confusion and customer vulnerability. Barclays has urged customers to remain vigilant and verify communications before sharing any sensitive information.

Regulatory and Legal Fallout

The fallout from the outage has prompted regulatory scrutiny, with the UK’s Financial Conduct Authority (FCA) monitoring Barclays’ response closely. While the FCA has not yet announced any formal penalties, financial regulators have made it clear that banks must ensure their digital infrastructure is robust and reliable.

Andrew Griffith, chair of the Treasury Committee, has called for Barclays to provide a full report on the causes of the outage and the measures being implemented to prevent a recurrence. “Banking services are a fundamental necessity in modern life, and such widespread failures are unacceptable,” Griffith stated. “We expect Barclays to take full responsibility and ensure this does not happen again.”

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Legal experts suggest that affected customers may also have grounds to pursue further compensation beyond the bank’s planned payouts. Consumer advocacy groups have encouraged those who suffered financial losses due to the outage to document their claims and seek redress where appropriate.

Ongoing Technical Fixes and Future Safeguards

Barclays has confirmed that a software fix from its mainframe provider is currently undergoing comprehensive testing before full deployment. The bank is also investing in infrastructure upgrades and additional redundancy measures to safeguard against future failures.

Meanwhile, consumer confidence in digital banking remains a critical issue, particularly as financial institutions continue to push customers toward online services. Experts warn that repeated outages and service disruptions could undermine trust in the sector and drive customers to seek alternative banking options.

Looking Ahead

With Barclays’ compensation process now underway, customers affected by the outage will be keen to see swift and fair resolutions to their claims. However, the broader implications of the incident may linger, particularly if regulators choose to impose further oversight or penalties on the bank.

For now, Barclays remains under pressure to reassure both customers and financial authorities that its banking systems are secure, reliable, and capable of withstanding future challenges in an increasingly digital world.

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