British lender Raphaels Bank has been fined £1.89m by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) for outsourcing lapses.

The errors stemmed from the bank’s reliance on third party card processors to carry out some card programme-related functions.

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On 2015 Christmas Eve, a technology glitch at one of these card processors had an impact on the authorisation and processing services it offered to the bank.

This prevented 3,367 customers from using their payment cards.

The incident affected 5,356 card transactions at POS terminals, ATMs and online.

On the bank’s part, the regulators observed lack of effective processes to evaluate the disaster recovery methods of the outsourced service providers.

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The watchdogs also accused the bank of management flaws and shortcomings in due diligence of outsourced service providers, among others.

Overall, the regulators found that the bank had insufficient outsourcing arrangements between April 2014 and December 2016.

Raphaels got a 30% discount on the fine after it agreed to resolve the case, without which the fine would have been £2.7m.

PRA CEO Sam Woods said: “Firms’ ability to manage outsourcing of any critical activities is a vital part of maintaining their safety and soundness.

“Such outsourcing is an important part of a firm’s operational resilience, and particularly so in the case of Raphaels given the level of reliance on outsourcing in its business model.

“In addition, this was a repeat failing which demonstrates a lack of adequate and timely remediation. This is a significant aggravating factor in this case, leading to an uplift in the penalty.”