CUSTOMERS of TSB faced widespread disruption this week following a calamitous switch over from an old IT system housed under its former parent, Lloyds Banking Group.

The meltdown left many individuals unable to log in to their online accounts. TSB business customer Mike Begg, founder of Dundee-based claims company Beat the Banks, said on Thursday that he had not been able to access his account for six days.

“I had to go into the branch and get them to manually pay my staff over their computer system, standing over them while they keyed in the details of every staff member,” he said.

In response to the problems TSB - which merged with Lloyds Bank in 1995 but was divested following the Government’s 2008 bailout of LloydsTSB - has promised to raise in-balance interest on current accounts from three per cent to 5% from May 2 and waive overdraft fees this month.

However, experts have warned that the botched migration of 1.2 million customers’ data to a new in-house system may be a sign of things to come in the wider banking sector.

Read more: Watchdog looks into TSB IT switch that 'gave customers access to wrong accounts'

Nick Hammond, adviser for financial services at World Wide Technology, said: “The problem TSB experienced really illustrates the complex interdependencies of banking IT systems, and the issues that arise when you try and make a serious change to them.

“Regulations coming into force this year require huge technical changes, which may lead to similar problems for many established banks.”

New rules coming from the EU around data protection, financial transparency and better payments are increasing the pressure on banks to upgrade their infrastructure, despite the potential chaos.

TSB is not the first bank to experience such issues, with RBS being fined a total of £56 million in 2014 after a software update installed two years earlier caused major disruption for customers of RBS, NatWest and Ulster Bank.

In addition to millions of customers being left unable to access their cash, the computer failure meant millions of payments into and out of accounts were also delayed.

Problems with IT systems also meant RBS had to abandon its planned sale of Williams & Glyn while in 2013 the Cooperative Bank pulled out of a deal to buy TSB from Lloyds partly due to IT.

Read more: TSB internet banking operating at 50 per cent capacity, says boss

But what can customers do when their banks are in chaos and are there incentives in place to encourage them to switch?

Some banks reward new customers with special insurance deals, travel vouchers and even free access to a range of courses, from bike maintenance to beauty therapy.

But the number of providers offering cold hard cash for your switching efforts is dwindling, and customers have to switch more frequently than ever to gain even modest bonuses.

Until this week, TSB was popular among cash chasers for its 3% interest on current accounts, which was beaten only by the Nationwide FlexDirect account, which offers 5% but only for a 12-months period.

While TSB will temporarily match this market-leading rate as compensation for its IT problems, Charlotte Nelson from financial website Moneyfacts said that customers should look past “attention-grabbing deals” and consider all the terms before committing to a new account.

“The lure of credit interest is high but these deals often come with funding and direct debit requirements,” she said.

These offers could also be on the way out, with Lloyds Banking Group the latest to slash current account interest by 50 per cent.

The rates on Club Lloyds and Bank of Scotland Vantage accounts are falling from 2% to 1.5% as of July 1, despite the Bank of England raising the base rate last November by 0.25 percentage points.

A time-honoured way to attract new customers – offering instant cash – is also under threat. Banks have been known to dangle up to £200 to persuade customers to switch.

Now, the most you can get with no strings attached is £75 courtesy of Halifax Reward, although you also get an indefinite £3 a month if you pay in £750 a month and have two direct debits.

Otherwise, newer banks are revamping their incentives by moving away from cash towards discounts on gadgets, travel and training courses.

The internet-only bank First Direct has scrapped its £125 sweetener for new customers in favour of “experience-based” rewards, such as vouchers for Expedia and Blue Mountain Training Solutions.

The latter offers a range of qualifications in both personal and professional pursuits, with a game design course topping the list at a value of £800.