Following the decision of the banking industry to drop its appeal against the High Court judgement that found against them in relation to misselling PPI policies, banks face a huge logistical challenge to process all the claims for compensation.

The scale of the task is enormous. British banks have sold up to 16 million payment policies in recent years, many of which are likely to be deemed to have been missold. Latest FSA figures show that 1.5 million policy holders have already complained about misselling. In total, Britain's five biggest banks - Lloyds Banking Group, RBS (which includes NatWest), Barclays, HSBC and Santander - have set aside £5.7bn to clear up the problem.

The most immediate challenge in relation to handling PPI complaints is logistical. Banks are struggling with a huge backlog of cases – particularly the smaller banks that are already under pressure and are under-resourced. Any failure to process claims efficiently will result in reputational damage for the banks and potential fines. Already, there have been complaints to the FSA about the speed with which this issue has been resolved.

Speed is vital:

Some banks have already taken swift action to clear the bottleneck, including retraining staff to handle the workload. Other banks have been seeking temporary offices to handle the claims processing. But there is concern that they simply will not be able to expand quickly enough to process all the claims – especially as the publicity around the PPI cases prompts additional claims. This additional demand comes at a time when the major banks had already cut...

Read more on this story: CCR Magazine - How will banks respond to the media glare of the PPI misselling issue?