Bank of Ireland Overcharging – another follow up

Scanning the electronic pages of the Irish Independent this morning I read that

  1. They claim to have had the scoop on this story (no, it was and
  2. They have “experts” (unnamed ones) who tell them that the actual number of impacted customers over the weekend could be up to 200,000.
  3. “Some other banks admitted there have been cases where Laser payments have mistakenly gone through on the double. But they said they have not had any serious problems.” (BOI had that angle on the issue back in June).
  4. The bank cannot guarantee that it won’t happen again.

I’ll leave points one to three for another time and focus at this point (as my bus to Dublin leaves soon) on the matter of the Bank of Ireland not being able to guarantee that it won’t happen again.

The Nature of Risk

Fair play to BOI for admitting that they can’t guarantee that this problem won’t happen again. It has happened before (in May), it has happened now, it is only prudent to say that it may happen again.

But are they not able to guarantee that it won’t happen again because they understand the causes of this problem, have properly mapped the process and information flows, understand the Happy Path and Crappy Path scenarios and the triggering factors for them  and have established robust detective and preventative controls on the information processes to prevent or flag errors to have a foolproof process but are hedging their bets against the occurence of idiots?  In that case, they have a managed process which will (hopefully) have effective governance structures around it to embed a quality culture that promotes early warning and prompt action to address the incidence of idiots which inevitably plagues fool proof processes.

Or are they unable to guarantee it won’t happen again because they lack some or all of the above?

Again I am forced to fall back on tortured analogies to explain this I fear.

A few years ago I had an accident in my car. I am unable to guarantee that for the rest of my driving life I won’t have another accident. Hence I have taken out insurance. However, I have also taken a bit of time to understand how the first accident occured and modified my driving to improve my ability to control the risk of accident. Hence I am able to get insurance.

Had I not modified my driving the probability of the same type of accident occuring would have been high, and as a result the cost of my insurance would be higher (no no-claims bonus for example).

However, because I understand the “Happy Path” I want to travel on when driving and also understand the Crappy Path that I can wind up on if I don’t take the appropriate care and apply the appropriate controls (preventative and detective) on how I drive I haven’t had an accident since I reversed into the neighbour’s car many moons ago.

I can’t guarantee it won’t happen again, but that is because I understand the nature of the risk and the extent to which I can control it, not because I am blissfully unaware of what is going on when I’m driving.

Information Quality and Trust

What does this idea of Information Quality and Trust mean? Well, the Indo put it very well this morning:

Revelations about the Laser card glitch, disclosed in yesterday’s Irish Independent, have shaken confidence in banks’ payments systems at a time when people are nervous about all financial transactions.

As I have said elsewhere, information is the key asset that fuels business and trade and is a key source of competitive advantage. In a cashless society it is not money that moves between bank accounts when you buy something, it is bits of information. Even when you take money from an ATM all you are really doing is turning the electronic fact into the physical thing it describes – €50 in your control to spend as you will.

When the quality of information is called into question there is an understandable destruction of trust. “The facts don’t stack up”…. “the numbers don’t add up”… these are common exasperated comments one can often hear, usually accompanied by a reduction in trust in what you are being told or a reluctance to make a decision on that information.

Somewhat ironically, it is the destruction of trust in the information around sub-prime mortgage lending and the bundled loan products that banks started trading to help spread their risk of in mortgage lending that has contributed to the current economic situation.

In the specific case of Bank of Ireland and the Laser card problems, the trust vacuum is compounded by

  • The bank’s failure to acknowledge the extent or timescale of the issue
  • The bank’s apparent lack of understanding of how the process works or where it is broken. [Correction & Update: Yesterday’s Irish Daily Mail says that the Bank does know what caused the problem and is working on a solution. The apparent cause is very similar to the hypotheses I set out in the post  previous to this one.]

This second one isn’t helped unfortunately by the fact that these issues can sometimes be complex and the word count available to a journalist is not often amenable to a detailed treatise on the finer points of batch processing transactions and error handling in complex financial services products.

That’s why it is even more important for the bank to be communicating effectively here in a way that is customer focussed not directed towards protecting the bank.

To restore trust, Bank of Ireland (and the other banks involved in Laser) needs to

  1. Demonstrate that they know how the process works… give a friendly graphic showing the high level process flow to the media (or your friendly neighbourhood voice of reason blogger). Heck, I’d even draw it for them if they would talk to me.
  2. From that simple diagram work out the Happy Path and Crappy Path scenarios. This may require a more detailed drill down than they might want to publish, but it is necessary. (they don’t need to publish the detail though).
  3. Once the Happy and Crappy paths are understood, identify what controls you currently have in place to keep things on the Happy Path. Test these controls. Where controls are lacking or absent, invest ASAP in robust controls.

The key thing now is that the banking system needs to be able to demonstrate that it has a handle on this to restore Trust. The way to do this is to ensure that the information meets the expectations of the customer.

I am a BOI customer. I expect to only pay for my lunch once. Make it so

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