Bright future for FinTech, as tech investments become top priority for UK financial services
By Gaia Lamperti
Increasingly, UK financial services firms are looking at acquisitions and partnerships with FinTechs to boost their services in the digital-oriented, post-pandemic market. according to a new report from Lloyds Bank.
The study, Lloyds Bank’s sixth annual Financial Institutions Sentiment Survey, found that 46% of financial institutions plan to extend their relationships with FinTech firms in the next year, compared with only a third of them (32%) in 2020.
“The UK has one of the most vibrant FinTech communities in the world,” Steve Everett, Head of Payments and Receivables, Client Products at Lloyds Bank Commercial Banking, said when commenting on the report. “They are at the forefront of innovation within financial services and, by partnering with them, the UK’s largest firms are showing they are committed to developing new products and services to meet changing client needs through collaboration.”
Lloyds surveyed over 100 senior decision-makers at financial services firms, including global banks, insurers, wealth and asset managers, to get their opinions on the state of the sector as the UK starts to emerge from the coronavirus crisis.
“There’s no doubt that financial services firms have proved incredibly resilient to the impacts of the coronavirus crisis compared to other sectors of the economy,” commented Adrian Walkling, Managing Director, Head of Financial Services, at Lloyds.
Indeed, the report shows that the sector that has performed robustly through the pandemic and is now leading the economic recovery, outlining expectations for growth, job creation and strategic investment plans in ESG goals, particularly relevant in the year of COP26. “It’s critical that we play our part in the transition to a low carbon green economy that will support the UK’s recovery,” Walkiling added.
Yet, technology remains the top investment priority for the UK financial services sector as four in five firms seek to improve the customer experience (71%), drive growth (60%), and boost productivity (59%) by investing in Cloud, APIs, and Artificial Intelligence technologies, with the aim of developing new products and services. About 77% of the surveyed said that technology, automation, and digital investment is a top strategic priority with 71% of them already investing in technology to improve the UX.
The Cloud, in particular, is what financial services firms mainly focus on right now, reflecting its importance in the digital transformation from legacy systems. Migrating products and systems to the Cloud will continue to help providers innovate, respond to customers’ ever-changing needs, improve productivity, and reduce the cost to serve. “We’ve seen how the financial services sector’s past focus on digitisation positioned it favourably when the pandemic hit, enabling it to transition to remote working almost seamlessly,” states the Lloyds report.
The side effect of that shift, however, is that firms have now become inherently more vulnerable to cyberattacks, with 70% of financial services companies reporting that they were affected by cybercrime in 2020. It comes as a surprise then that, while growing numbers flag cybercrime as a significant risk in the survey, fewer firms hold cyber resilience as a strategic priority (down from last year’s 34% to 29%), showing that investments in cybersecurity are not yet taken with due seriousness.
In conclusion, the intention of continuing to partner up with FinTechs shown by financial institutions is positive, with businesses still clearly committed to finding new digital solutions to meet changing client needs through collaboration.
Particularly, British FinTech firms can rightly be proud of their position as leaders in the global market having won venture capital investments totalling £4.1 billion in just the first half of 2021 and smashing the previous record of £3.3 billion for the whole of 2019.
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