Are UK banks falling behind innovation?

By Gaia Lamperti

A new independent survey of more than 250 UK banking and financial services companies has revealed their attitudes towards innovation. The study, conducted by London-based technology company Yobota, which is behind a fast Cloud-native core banking platform, found out that 2 in 5 UK banks are falling behind competitors where innovation is concerned.

When asked about the challenges they face, 55% said they have been held back from trialling new technologies due to a lack of formal guidance from UK regulators. Two thirds (65%) said regulators are not responding quickly enough to new trends, thereby hindering innovation within the sector.

From such data, it looks like UK banks and FS institutions are experiencing roadblocks in embracing innovation, yet the majority remain bullish on tech investment for 2022. Three quarters (75%) said the more sophisticated use of technology is a critical part of their business’ plan for improving its products and services in 2022, yet half (50%) admitted that the implementation of new tech has been slow over the past year due to their organisation’s reliance on legacy systems.

“The pandemic has catalysed changes across the banking sector. Technology is now playing a far greater role in allowing finance companies to deliver exceptional products, services and experiences to customers,” Ion Fratiloiu, Head of Commercial at Yobota, said. “Clearly, the pace of change is a cause for concern among many banks and financial services firms. That 40% feel they are falling behind is telling – we should expect to see significant investment in fintech trends like Banking-as-a-Service and embedded finance in 2022, with banks keen to remain ahead of competitors.”

The market research was carried out in November 2021 among 261 UK business leaders in the banking and financial services industries via an online survey by independent market research agency Censuswide. The data sample of 261 UK adults all, at the time of the survey, worked full-time in management positions – middle managers, senior managers, board members, C-suite, founders, directors – within the banking and financial services industries.

More broadly, Yobota’s research showed that 73% of banks and FS firms feel that financial institutions must start operating more like technology companies if they are to deliver innovative products and services to customers. Further, 60% think neo-banks will one day overtake traditional tier-1 banks, with 59% putting this down to their ability to meet customer needs more effectively.

That said, most (63%) decision-makers agreed that the playing field between traditional banks and FinTech companies has become more level over the past 12 months.

“Many of the more progressive strategies will likely involve cloud-native banking platforms. These will allow finance companies to deliver new and enhanced products more quickly, while also better supporting partnerships between banks, fintechs and brands,” Frantiloiu added.

Key findings:

• 40% fear they are falling behind competitors where innovation is concerned
  • 55% said a lack of formal guidance from regulators is holding them back
  • 50% blame their organisation’s over-reliance on legacy tech
• 60% think neo-banks will one day overtake traditional tier-1 banks
• Vast majority (80%) said investing in new tech is a priority for their business in 2022