New decade, old problem: Payments outages persist into 2020
Card brands and banks suffered through several outages over the past two years that stranded consumers and drew bad press and political pressure. And already, this problem has bled into 2020.
So far this year, Lloyds and Clydesdale and Yorkshire Banks have had payment failures in the U.K. And in the U.S., a software glitch at parking technology vendor Parkeon halted digital payments at meters in New York and other cities.
These outages have largely cleared. The U.K. banks were back online within a day of their respective outages, and the New York parking meter outage, which impacted about 14,000 meters, is on target to be repaired by Thursday. In New York, thousands of meters have supported only coin payments — allowing fines to still be enforced — for much of the past week.
“In the U.S., a very small number of our clients were impacted and we were able to quickly work with those clients so that their pay stations accept credit card payment again,” said Sean Renn, a spokesperson for Flowbird, the Paris-based software company that owns Parkeon.
Parkeon, which is based in the U.S., has had troubles in the New York area in the past — it altered a pilot in 2014 when its process of printing coupons with parking stubs confused consumers about how the system worked. “There has been significant progress made on updating New York City’s meters," Renn said.
Lloyds’ outage affected Lloyds, Halifax and Bank of Scotland for several hours last week, causing consumers to be largely shut out of accounts, though ATMs were still operable. At Clydesdale and Yorkshire Bank, a financial group that includes Virgin Money, consumers were unable to access payroll and other payment services. The bank initially instructed consumers to contact employers to find missing wages, then recanted when the problem was found to be larger.
The delay was caused by the processing date for a Bacs (U.K. clearing) file being incorrect, said Simon Hall, a spokesperson for Virgin Money, who did not disclose the size of scope of the outage and added the institution has taken steps to ensure the same issue does not happen again. Lloyds did not return a request for comment.
The troubles mirror other unintentional payment shutdowns at banks and card brands throughout 2018 and 2019 and draw attention to the challenges is replacing existing payment infrastructure with new digital processes. As more people pay to park, ride transit and shop with mobile devices — or a mix of forms — the stress of managing old and new technologies becomes greater.
“Every IT department tunes its internal legacy systems, network messaging platforms and processes to support the transaction flows that occur during peak operational load, typically the holidays,” said Tim Sloane, vice president of payments innovation at Mercator Advisory Group. “These systems may not align well when new transactional flows and data formats are introduced with partners.”
The payment and banking outages of the past two years touched a number of large banks and card networks, causing U.K. regulators to threaten action to require contingencies and fines for financial institutions that do not adequately update important systems.
Visa suffered an outage in Europe in 2018 that left consumers unable to make payments at supermarkets, access ATMs or buy transport tickets. That outage, and Visa’s incremental disclosure of its size and cause, resulted in pressure from the U.K. Parliament. Visa later blamed the incident on older processing systems that had not yet been phased out as part of a broader upgrade.
Shortly after Visa's outage, Mastercard suffered a similar outage, which impacted users of Revolut, Monzo and other fintechs. Halifax, Lloyds, and the U.K.'s faster payments system also experienced technical problems around the same time as these incidents. By late 2019, the rate of payment and online bank outages in the U.K. averaged 10 per month.
In the U.S., Target suffered two payment outages in the space of a few days in 2019, one related to an internal technology issue and another tied to the retailer's third party data center. And Wells Fargo was hit by an outage in 2019 that caused credit and debit cards to be declined at various merchants.
The technology troubles come as more banks and fintechs collaborate to accommodate open banking initiatives that are designed to share data among users and institutions, as well as the growth of real time payment processing and omnichannel shopping. All of these trends require banks, merchants, and other third parties to partner on data, processing and security.
It is critical that financial institutions work closely with partners to fine tune performance and reliability for each new product that falls outside the traditional set of payment transactions, Sloane said.
“This is typically done as partners utilize the institution’s development sandbox and before any solution goes live,” he said. “I have heard of significant problems, such as middleware failing to support high transaction rates, discovered during testing but am not aware of operational failure to a lack of such tests.”