The Westpac Story: A Cautionary Tale of Misplaced Infra Focus

The headlines screamed that major Australian bank Westpac had ignored hardship application requests submitted by customers online, and the stories went on to describe some of the tragic circumstances they faced.

One single mother with two children said she could not work after a finger was "nearly amputated," which led to infection.

Another was caring for a daughter who had needed two brain surgeries and two spinal injuries and required ongoing procedures in a hospital two hours from the family home.

In some cases, Westpac had continued debt collection activities against customers waiting for a response to hardship applications. In six instances, it seized assets such as vehicles or property. 29 customers were forced into bankruptcy.

These details came out after Australian corporate regulator ASIC began legal action against Westpac in the Federal Court last week, claiming the bank failed to respond to hardship notices from financially struggling customers.

The ASIC filing also shows the root cause of the problem—old and poorly configured and performing online applications.

The case is a cautionary tale, if any is needed, of how IT problems in customer-facing systems can devastate a company's reputation.

Omission, not malice

It is not as though Westpac deliberately ignored or persecuted its customers. There was no evil executive intentionally pursuing a policy of sending anyone bankrupt.

Almost everything happened by omission because the bank’s systems weren’t up to scratch.

“Westpac continues to acknowledge the deficiencies with its systems and processes concerning online hardship notices during and following the Relevant Period arising from, among other things, complex multiple legacy technology platforms and underinvestment in modern simplified technology infrastructure,” the ASIC filing says.

It quotes from an audit report Westpac conducted early this year, which found that online customer hardship requests were not always sent to customer assist staff to action, "resulting in a delay in the outcome provided to customers, or no outcome being provided."

“Westpac does not have a consolidated system view of customers for collections and hardship…due to years of under investment.”

Westpac’s audit report identified an “end-to-end control gap” between the lodging of hardship applications and their flagging in core collection systems.

The underperformance was noted back in 2015 when OneClick solutions had been introduced. It was identified that the reconciliation between the solutions was not working as it should.

“Multiple historical incidents and application reconciliation control gaps and weaknesses have been raised by Management to date over deficiencies in the online hardship process,” the Westpac audit report said.

Perhaps the most damning comment also came from Westpac’s own audit report and was quoted in the ASIC filing.

“Westpac does not have a consolidated system view of customers for collections and hardship and inadequate progress in business (and technology) simplification of the multi-brand, multi-systems legacy environment due to years of under investment,” the report said.

ASIC’s conclusion, which was fully reported in the Australian media, was that it had failed to ensure that the bank had acted “efficiently, honestly and fairly” in dealing with customer hardship applications.

Later, Westpac came out with a press release apologizing to its customers and promising that it had "strengthened our processes and is upgrading our online hardship applications."

Ultimate responsibility

The case is interesting because, ultimately, the humans in charge at Westpac are being blamed for problems in the IT systems that impacted customers, even though they had little or no idea of what was happening.

The Westpac humans are responsible for those IT systems, and it would seem that they failed to address issues identified at an early stage, but the problems were ones of omission rather than malice.

And yet, the outcome is damage to the Westpac brand and a loss of customer confidence.

Instead of being swift and responsive to customer hardship applications, some people will now see Westpac as uncaring and punitive.

Go to the Westpac website, and you will see it heavily promoting empathy and understanding towards people in hardship.

“You are not alone. We are here to help,” the website says.

“We know that financial stress can sometimes be a result of unplanned life events such as change of income, illness, a relationship breakdown, reduction in your business cash flow or emergency events like natural disasters.”

All this sounds great, but in this case, the gap between words and actions was stark, and poor IT management is to blame.

Westpac may have been able to respond with empathy to those tragic cases that made headlines this week, but a combination of technology underinvestment, mismatched legacy and lazy risk management combined to inflect unnecessary self-harm on the brand and land it in court in an unwelcome court action brought by the national regulator.

The case is a prime example of how IT decision-making can impact customers and inflict reputational damage.

One can only hope that Westpac and other corporates watching on the sidelines may have learned a lesson.

Lachlan Colquhoun is the Australia and New Zealand correspondent for CDOTrends and the NextGenConnectivity editor. He remains fascinated with how businesses reinvent themselves through digital technology to solve existing issues and change their business models. You can reach him at [email protected].

Image credit: iStockphoto/Nuthawut Somsuk