UK banks accelerate payments revamp with big new budgets

By Vriti Gothi

UK banks are signalling a major shift in their approach to payments infrastructure, with institutions planning to spend an average of nearly $1.25 million each over the next 12 months to replace outdated systems and strengthen resilience.

The findings, based on a survey of senior banking executives, reveal a strong consensus on the need to overhaul legacy technology to keep pace with evolving market demands, regulatory requirements, and intensifying competition from nimble fintech players and neobanks.

According to the survey, 100% of UK banks plan to roll out new payments solutions to replace one or more legacy systems, with almost two-thirds aiming to make the transition within the next six months. A notable 21% of banks are moving even faster, planning implementation within just one to three weeks.

Despite industry-wide enthusiasm for modernisation, almost a third of UK banks still rely on ageing payments systems often built in-house or stitched together from vendor solutions that are five to ten years old, or even older. This legacy infrastructure has become a growing barrier to cost efficiency, operational resilience, and the ability to meet rising customer expectations for real-time payments.

More than a quarter (27%) of UK banks identified cost efficiency and resilience as their top motivators for modernisation. Other drivers include the opportunity to better leverage ISO 20022 data standards, respond to shifting customer behaviours, and counter competitive pressure from fintech challengers.

As UK banks prepare to invest significant budgets in upgrading their payments capabilities, selecting the right technology partners has emerged as a critical concern. Around a third (32%) of banks cited vendor selection as their biggest worry, followed by challenges around internal expertise and the risk of business disruption during migration.

The survey highlights that while there is growing curiosity about cloud adoption for payments, on-premises systems still dominate. Over two in five UK banks are currently exploring cloud-based solutions, but many are proceeding cautiously.

Interestingly, even though SEPA Instant Payments is not mandatory in the UK market, one in seven banks already offers the service, with another quarter close to doing so—underlining the wider trend towards faster, real-time payment options.

Industry leaders emphasise that while the scale of investment reflects the urgency of modernising payments, banks must approach the process strategically. For many, this means moving in carefully planned phases that minimise operational disruption while delivering clear business value.

Payments experts believe that trusted partners and robust PaaS models will play a pivotal role in helping banks future-proof their infrastructure, reduce risk, and respond faster to customer and regulatory demands.

With rising budgets and ambitious timelines, 2025 looks set to be a defining year for payments transformation in the UK banking sector.