Barclays’ Outage Exposes the Hidden Risks of a Cashless UK

February 2025

Fintech & Payments

Nick Maynard

VP of Research

Barclays’ system outage on Friday, 31st January, caused major disruptions for UK customers, affecting mobile and online banking. Many struggled to make payments or saw transactions fail to appear in the app. The timing made the situation even worse - falling on a common UK pay cycle day and the final deadline for self-assessment tax payments to HMRC.

Services were restored by Sunday, 2nd February, and Barclays pledged compensation for affected users. However, the outage raises important questions about the risks of a cashless society, vulnerabilities in the UK payments system, and the need for change. A recent banking app outage at Lloyds Banking Group further highlights these concerns.

Cashless Society – Creating Risks

It has been clear for some time that the UK is headed towards an increasingly cashless society, according to the latest figures from UK Finance. The use of cash is now in freefall, accounting for only 12% of transactions in 2023 (compared to 60% in 2008), while Faster Payments are becoming increasingly popular, alongside cards and other methods.

Payment Volumes (m), 2013-2023

Source: UK Finance – UK Payments Markets Summary July 2024

While there is an increased use of cashless payments, there are major benefits, such as increased convenience, security and the ability to access credit and other financial services. However, this also opens up key vulnerabilities.  If digital payment methods are unavailable for any amount of time, this can cause chaos as consumers are used to digital methods. Indeed, we saw this with the Barclays outage, with users unable to pay their tax bills, being unable to transfer money to cover grocery shopping, or being made homeless by being unable to complete a house purchase.

What Can Banks Do to Mitigate Risk?

So, what can be done to mitigate the risks of over relying on digital payment methods? Firstly, banks must take all measures to ensure that outages do not occur in the first place. While the causes for this outage are not as yet clear, banks have extremely complicated IT systems. In particular, banks have often heavily outdated core banking systems, which by themselves are unable to be updated to the latest standards. As such, banking software systems often become complex combinations of different systems; increasing the risk of technical issues striking.

While banks can update their core banking systems to be more modern, overhauling their existing systems also comes with risks, such as the upgrade failing and causing an outage of its own. As such, we recommend that banks should upgrade their core systems’ architecture, but should do so in a way that is measured, incremental and carefully planned to avoid risk.

Expanding Payments Choice for Resilience

Another key strategy that the wider industry, as well as government, should embrace is having more payment system choice. Card has a dominant role in the UK, and this role is even more prevalent when you consider that digital wallets are also gaining traction, and operate mainly as card proxies in the UK. As such, the UK payment system is highly vulnerable to an interruption in card payments, and outages of card payments have previously caused major issues, even when linked to only one major retailer.

As such, providing an alternative payments system that is not reliant on card rails has major potential to reduce risks in the UK market. Account to account (A2A) payments are a major opportunity here, which has been recognised in the UK Government’s National Payments Vision, published in late 2024. Similarly, work towards a retail Central Bank Digital Currency (CBDC) in the UK is also continuing, again boosting the potential for further payment options.

We recommend that the UK Government explores all potential options to boost payments choice in the UK, which will have many benefits, such as reducing cost, but will also create redundancy in the payments systems, which is badly needed.

Conclusion

Fundamentally, banks are critically important to how society operates on a day-to-day basis – any downtime is a major issue, so banks are under intense scrutiny. Given the scale of the challenge in ensuring continued reliability, banks understandably face a difficult task. Banks must ensure that they follow technological strategies that minimise risk, and act quickly when outages occur. However, it is not all on banks. Regulators must ensure that regulatory frameworks enforce a strong level of redundancy in banking and payments, particularly as we shift to an increasingly cashless society.

Nick Maynard is VP of Fintech Market Research at Juniper Research, enabling clients to size new market opportunities, set priorities for future growth, and understand their customers through survey projects. He also enjoys helping clients promote their expertise and vision of markets with compelling thought‑leadership whitepapers, webinars, and other media. Nick has been interviewed by major news outlets such as CNBC, Coindesk, and the BBC, and has spoken at key industry events including Money 20/20 Europe.