Chase’s Outage: Fact of Life in E-Payments World

After being out all day Tuesday, JPMorgan Chase & Co.’s online-banking service sputtered back to life early Wednesday. Service, however, was spotty at times, though by mid-afternoon it seemed to be working normally again. But with 16.6 million active online-banking customers potentially affected, the outage was big enough to warrant an apology by JPMorgan Chase chief executive Jamie Dimon during a banking conference Tuesday.

Chase gave few details about what caused the outage, which started Monday evening and lasted until about 1:00 a.m. Eastern time Wednesday. A spokeswoman tells Digital Transactions News that fraud was not the cause. “It’s a technical issue, software issue,” the spokeswoman says. “I can verify that; there was no security breach.”

The outage did not affect Chase’s 15,654 ATMs, 5,159 branches, or telephone-banking system. The spokeswoman says Chase will refund late fees to customers who couldn’t complete planned transactions during the outage, provided they call Chase’s phone service.

Such outages are an increasing risk of doing business for banks and payment-services providers as consumers migrate to electronic banking and payments in ever-larger numbers. In its second-quarter report, Chase said that its active online-banking customer base was up 19% from 13.9 million a year earlier. PayPal Inc. suffered a big outage on Aug. 3, 2009 when a piece of network hardware failed. The outage, apparently the worst in PayPal’s history, may have affected more than 100,000 transactions (Digital Transactions News, Aug. 4, 2009).

As they did in the wake of PayPal’s outage, Chase’s problems triggered a flurry of speculation about the damage to customer relations and how providers should report problems. Celent LLC senior analyst Jacob Jegher noted on Celent’s banking blog that Chase’s Web site said the system was down for “scheduled system maintenance.” “I can’t say I know of a single bank that conducts system maintenance in the middle of the day, let alone for an extended amount of time!” he wrote. (Attempted log-ons by Digital Transactions News at mid-day and in the evening brought up a message reporting “technical” problems.)

All the while, customers sent messages over Twitter complaining about how they couldn’t access their accounts, but Chase didn’t use social media to communicate with its customer base, Jegher says. “Even if they weren’t ready to be on social networks, they should at least post a notice on their Web site,” he tells Digital Transactions News.

Veteran bank-technology watcher James Van Dyke, president of Javelin Strategy & Research, says Chase’s is a more notable example of a problem that happens throughout the financial industry. “When you look at these diverse pieces [of hardware and software] it’s a miracle it works at all,” he says. “Sometimes it breaks down. I don’t think there isn’t anyone who hasn’t had it happen, at least for a short amount of time.”

Van Dyke, however, doesn’t think Chase will suffer long-term customer-relations damage, assuming it quickly gets the online-banking service back to normal. “People get used to this stuff,” he says. “They’ll be steamed in the short term, but they’ll pretty much get over it.”