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Catching errors before they make headlines

Picture of Yusuf Moolla
TL;DR
• Recent public cases and reports show customers losing money (and reputational damage) due to errors that went unnoticed for years.
• For banks and insurers, this can be costly and damage their reputation.
• Regular checks, tests whenever something changes, and keeping track of patterns in complaints can catch these much earlier.

 

Many errors don’t make headlines. Those that do can be both embarrassing and expensive. Those that don’t may cause little or no reputational damage, but they’re still problems that can affect customers.

The examples in this article combine human and system deficiencies. The underlying causes might be complex, but the errors are avoidable, or can be caught early.

 

Three recent examples

  1. A Canadian bank1 replaced compromised credit cards with new accounts, but didn't carry customer credits across. Customers were out of pocket, and this went on for 23 years. The bank paid about C$27m (to customers, a charity donation, and a penalty). The remediation project cost would likely have been significant.

  2. A New Zealand bank2 changed its terms in 2017 to make some cheque transactions free, but kept charging the fee for another six years. The bank paid about NZ$1.7m to more than 7,000 business customers. Again, the remediation project would have been costly.

  3. An Australian regulator3 reviewed mortgage offset practices at eight banks. All had weaknesses in how they linked savings accounts to home loans. Customers pay more interest than they should when the link doesn’t work properly. These types of weaknesses have been around for many years. The Bank of Queensland4 found an offset problem more than 10 years ago, and reportedly spent about A$58m on offset errors and related problems.

The failures don't always clearly belong to one system or team. Customers rarely notice, because they expect their bank or insurer to get the calculations right, and it’s not always easy (or possible) for them to check. A missing credit or slightly higher charge doesn't stand out on a statement. So when a customer does complain, it's worth checking whether the issue (if any) is isolated or systemic.

We've written about similar errors before, including an insurance rule change that wasn't properly implemented.

 

Catching these errors earlier

A few things that can help:

  • Checking the overall process at regular intervals, focusing on actual outcomes, such as what customers were charged, not just whether the steps were followed.
  • Checking systems across the process when changes are made, such as changing how a product works, or how it is meant to work.
  • Listening to customer feedback (complaints), and looking at complaints together rather than one at a time.

 

 

  1. Canada: https://www.canada.ca/en/financial-consumer-agency/services/industry/commissioner-decisions/summary-proceeding-5.html
  2. New Zealand: https://www.fma.govt.nz/news/all-releases/media-releases/fma-warns-of-tsb-overcharging-on-business-accounts/
  3. Australia: https://www.asic.gov.au/about-asic/news-centre/find-a-media-release/2026-releases/26-173mr-hidden-mortgage-offset-failures-costing-australians-millions-in-lost-interest-savings
  4. Bank of Queensland: https://web.archive.org/web/20131024124129/http://www.asic.gov.au/asic/asic.nsf/byHeadline/13-286MR%20ASIC%20action%20sees%20BOQ%20extend%20independent%20expert%20review?opendocument

 

Disclaimer: The info in this article is not legal advice. It may not be relevant to your circumstances. It was written for specific contexts within banks and insurers, may not apply to other contexts, and may not be relevant to other types of organisations.