ATM glitches -- just another reason to doubt our banks
Dan White on the digital meltdowns that are stripping away customer confidence
AIB's pre-Christmas computer problem, which inconvenienced tens of thousands of its customers, shows just how vulnerable we all are when our bank's computer system goes on the blink.
Ever since Bank of Ireland unveiled the first Irish hole-in-the-wall ATM machine in 1980, an example that was quickly followed by its competitors, the banks have been making it progressively more awkward for us to conduct our business in branches. They have instead used all means, fair and foul, to "encourage" us to do our banking electronically through ATM machines, by telephone or, more recently, online.
That's all very fine and dandy when electronic and online banking works, but what happens when it doesn't?
AIB customers learned this lesson the hard way when, just before Christmas, a glitch in its system meant that customers were unable to use their debit cards to withdraw cash from either retailers' point-of-sale terminals or other banks' ATM machines.
While the problem, which AIB blames on issues with a third-party service provider, was quickly resolved, it demonstrated once again just how vulnerable banks and their customers are when things go wrong.
Unfortunately, this was not the first time bank customers have been left in the lurch by computer problems.
In June 2012, a botched software upgrade at UK bank RBS, which owns Ulster Bank in this country, resulted in customers being unable to access their accounts for several weeks.
Ulster Bank customers seem to have been particularly badly hit, with 30,000 social welfare recipients temporarily unable to withdraw their payments from their accounts.
Then it happened all over again last year when, on December 2, the busiest day of the year for online purchases (or 'cyber Monday' as it is often referred to), up to 750,000 RBS and Ulster Bank customers were unable to make on-line or credit card payments.
While one computer glitch could be described as being merely unfortunate, two within 18 months starts to look suspiciously like a pattern.
Were the problems at RBS, as many analysts suspected, the result of chronic under-investment in its IT systems during the reign of ex-chief executive Fred "the shred" Goodwin?
These fears were confirmed when current RBS chief executive Ross McEwan blamed the December crash on the bank's failure to "properly invest" in its computer systems.
Bringing the RBS computer systems up to scratch will come at a heavy cost -- up to £1bn by some estimates.
Were AIB's recent problems also the result of scrimping on IT investment by its previous management?
Not so, says an AIB spokesperson. "The problem was with a third-party service provider. They [the provider] were overwhelmed by the transaction volumes and this, in turn, had a knock-on effect on AIB and its customers."
In fairness to AIB, it does appear that its pre-Christmas problems were several orders of magnitude less severe than those experienced by RBS, where the entire system crashed.
That's the good news.
The bad news is that if the banks want to persuade us to use electronic or online banking services instead of clogging up their branches with routine transactions, then we as customers must be confident that we won't be turned away empty-handed from the ATM or embarrassed at the teller.
Because, when the verbiage is stripped away, banking is all about confidence. While the 2008 banking panic was the first to hit this country in over 120 years, bank runs were a relatively frequent occurrence until the 1880s.
That's why the surviving banks built palatial branches with cut stone exteriors and elaborate carved wood interiors. By doing so, they were seeking to distract customers' attention from the essential fragility of any bank, which must borrow short, ie take in deposits, to lend long.
Now that the banks are closing expensive-to-run branches as quickly as they possibly can and encouraging us to use cheaper -- for the banks anyway -- electronic and online banking, maintaining customer confidence is more important than ever.
When there was a bank on virtually every corner all you had to do was toddle down to your nearest branch to complain if you had a problem. In the brave new world of electronic banking it's considerably more difficult to conduct a meaningful argument with an ATM machine.
Not that there's room for nostalgia. The 'good old days' meant customer-unfriendly outlets that deigned to open just 25 hours a week and where customers had to endure long queues.
By comparison, the experience of electronic or online banking has invariably been of a service delivered speedily and efficiently, and thus huge gains in convenience. However, the RBS and AIB incidents should serve as a warning for all banks.
As RBS learned to its cost, the "savings" from cutting back on computer investment can turn out to be very expensive indeed.
The banks that didn't pay out . . . and the one that paid out too much
AIB and RBS haven't been the only banks to have had problems with their computer systems in recent years. The customers of many other banks have also been hit by systems failures.
JP Morgan Chase: Personal information on more than half a million private and government customers of JP Morgan Chase, America's largest bank, was accessed in a cyber-attack on the bank's computer network in July 2013.
PNC: Branches of PNC, America's seventh-largest bank, temporarily shut down and customer deposits were not updated after a pair of system problems last month.
Commonwealth Bank: In December 2010 customers of Australian bank Commonwealth experienced problems with online banking and ATM withdrawals. Then in March 2011 customers making ATM withdrawals found that, instead of getting no money, they were getting too much.
National Australia Bank: In November 2010 someone in NAB's IT department uploaded the wrong file on to its computer system. ATMs shut down, direct debits remained unpaid and interbank payments ceased. It took more than two weeks before NAB's computer system resumed normal service.
Westpac: In March and May 2011 and February 2012 online customers of Australian bank Westpac were unable to access their accounts on several occasions. The problem was blamed on server overload as more customers than expected logged on.
ANZ Bank: The systems of Australian bank ANZ crashed on several occasions in 2010 leaving customers unable to access their online accounts or make ATM withdrawals.
Barclays: A power failure led to fault on the website of UK bank Barclays in July 2012. Although customers could still access their accounts the timing was extremely embarrassing for the bank as its chairman was due to be questioned by a group of MPs on the same day.