How is FinTech transforming Financial Services in the UK?

Discover our latest insights into UK perspectives on how FinTech is disrupting the Financial Services industry

The lines between Financial Services and Technology organisations have blurred, and FinTech is at the epicentre of this transformation. Both industries are using FinTech to sharpen operational efficiency and improve customer experience, while recognising the opportunity to carve out new commercial possibilities. But which organisations will apply it best and emerge as leaders?

Our Global Fintech Report - Crossing the Lines - is the third in a series charting the rapid evolution of FinTech across the globe. The report explores how FinTech is propelling Financial Services and Technology organisations out of their lanes and asks what successful organisations of tomorrow need to be doing today to prepare. Below we explore how UK Financial Services organisations fare in this evolving world, and draw attention to some key differences between how those in the UK are reacting and responding when compared to their global counterparts.

How has the UK responded to the latest FinTech disruptions?

Technologies driving change

A different view on the technologies driving change: more focus on robotic process automation (RPA)

  • Of the top four technologies set to transform the way financial services are delivered over the next two years, both UK and Global FS organisations are betting on Artificial Intelligence (AI), Big Data and Cloud.
  • However the UK places greater transformative potential on RPA (39% UK vs 31% Global) while Global FS organisations are betting more on blockchain (40% Global vs 27% UK).

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FinTech-centred strategies

Slower progress towards a FinTech-centred strategy 

  • Overall, the UK’s FS organisations are only slightly behind Global counterparts in embedding FinTech into their operating models (44% UK vs. 48% Global say it is fully embedded).
  • However, UK organisations have undertaken fewer activities to drive FinTech growth e.g. only 28% have used FinTech to launch a new product/service in the UK vs 45% Global; 26% to outsource vs. 43% Global; 23% to collaborate vs 44% Global; 21% to set up a new strategic alliance or joint venture vs 41% Global.
  • The UK is behind in moving FinTech products beyond the pilot stage and making them available to customers (27% UK vs 37% Global) and only 5% are making a profit (compared to 17% Global). However, we are seeing more coming through, certainly with some of the larger incumbents.
  • Consequently, there is also less confidence in the UK that FinTech will deliver revenue growth (39% UK ‘very confident’ vs 48% Global).
  • Some may challenge this given the size of investment that has been made by UK organisations, although this can be countered by some of the failures due to insufficient technical/innovation experience from management and the broader workforce.
  • One point to note is the challenge of attracting high technical skills into a traditional incumbent environment versus a tech organisation like Google or Amazon.

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Emerging tech implementation

Less advanced in incorporating emerging tech into products and services

  • The product/service area where UK organisations have most incorporated emerging tech is payments, where 49% have incorporated it (compared to 56% Global).
  • The UK is significantly behind in all other areas, e.g. traditional deposits (17% vs 46%); asset management (17% vs 48%); funds transfer (22% vs 52%); mortgage loans (22% vs 44%).
  • In relation to the technologies being pursued, the UK is ahead in its implementation of RPA (37% vs 28% have implemented) but behind in the implementation of all other technologies (e.g. 29% have implemented big data, vs 46% Global; 15% implemented IoT, vs 31% Global).
  • Across all the technologies considered, the UK is more likely to have no plans in the next 2 years to pursue use of the technologies, in particular blockchain (29% vs 13%), 5G (34% vs 17%), and big data (15% vs 4%).
  • As progress in China and other Asian countries spurs incumbents to look outside the EU for innovative solutions, and as the potential threats of new entrants rise, especially with the likes of WePay and Alipay looking to enter into the EU, the UK will have to accelerate the use of emerging tech. Furthermore, the introduction of Digital Banks in Asia will present thought-provoking challenge on how the UK keeps its leading position.

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Recruitment struggles

More junior leadership and struggles to recruit

  • Responsibility for technology, innovation and digital strategy in the UK is given to less senior staff than Global (34% C-Suite led in the UK; 41% Global). This is slowing progress, however we are seeing C-Suite level leaders getting more involved in driving the innovation agenda.
  • Increased C-Suite involvement will pave the way for more investment and bring a more attractive environment for real innovation and partnership with FinTechs, helping to e.g. bridge the gap with challenger banks for example.
  • More jobs related to FinTech are being created in the UK, but the impact is less than in the job market globally (63% UK; 75% Global).
  • The UK is struggling to fill these jobs more than Global (only 17% successfully filling them compared to 33% Global).
  • The UK is slightly more concerned about the availability of skills amongst senior leadership (73% vs 69%) and workforce (76% vs 73%) than Global counterparts.

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Legacy and regulation challenges

Legacy systems and regulation are top challenges for implementation

  • The top 3 challenges noted by UK organisations when implementing FinTech strategies are legacy systems, regulation, and data management practices; this compares to Global organisations whose top concern is security and compliance.
  • Regulation and legacy have been key blockers in preventing real innovation due to failures in the FS market, however we are seeing that regulators are more keen to be proactive in bringing innovation into policy; the FCA as an example have introduced a sandbox to test new solutions and the ICO has done something similar.
  • The ultimate challenge still remains to be legacy which requires significant investment. The only real solution is to start from scratch or ultimately partner with FinTechs, a more reaching and powerful solution. The UK’s top regulatory concerns are KYC (16%) and AML (16%), compared to Global for whom data protection tops the list (15%) followed by digital identity (13%).

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Driving customer centricity

Challenges in driving customer centricity, amid disruption from start-ups

  • UK FS organisations are less positive about their competitive position than FS organisations globally - e.g. only 5% of UK FS organisations say they are ahead of competitors in relation to digital customer interactions, compared to 33% of Global FS; 10% vs 29% re development of digital products; 10% vs 30% re skills and development of workforce.
  • The UK identifies ‘ease of use’ as the most important area for customer retention in the context of emerging tech, and places greater emphasis on this than Global (19% vs 13%).
  • The UK puts very little emphasis on personal digital contact as a priority for retention (2%, the least important (11/11) compared to Global 9%, 5th most important).
  • UK FS organisations are less confident that they are meeting customer expectations with the right balance of personalised digital contact vs direct human contact (27% don’t feel they are, vs 13% Global). The challenge of legacy technology mentioned above is also preventing delivery of real change to  enable FS organisations to meet customer expectations, especially to meet the digital expectations of younger customer segments.
  • The UK expects greatest disruption from start-ups, citing their innovative culture and the tech they use; Global FS organisations instead see tech companies as the biggest disruptors, citing innovative culture and digitally-intuitive infrastructure.

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Additional insights

  • With shared focus on the UK, US and Germany, the UK rank France and Singapore in their top 5 countries important for their organisations' growth prospects, compared to global UK FS organisations who rank China and India more important for growth.
  • The UK share the view that the US, UK and China have the right conditions for FinTech to thrive, although the UK puts greater emphasis on the UK, while global counterparts put more emphasis on China.

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How can you position your organisation for success?

Digital advances have the potential to revolutionise capabilities, but require a clear understanding of customer expectations and the ability to leverage tech in new ways

  • Personalise and customise - know your customers by segment, we all have different needs/wants from technology
  • Balance tech and human touch
  • Make cyber security and data protection business priority
  • Build privacy into digital and technology
  • Open up the black box and challenge established platforms for change
  • Leverage data driven insights to tailor offerings to meet customer expectations

Gaining access to digital-ready employees, upskilling, and fostering an innovation mind-set are key to unlocking growth

  • Manage the real impact of technology
  • Shift your workforce from analogue to digital
  • Create a culture and environment of innovation

Collaboration or acquisition offer huge potential, if planned for and managed properly

  • Embrace a collaborative operating model
  • Plan and test a detailed operating model of the combined entity
  • Get the right investment and support from the exec level; collaboration is key to success

Meeting regulatory expectations while sustaining innovation, personalisation and customer appeal is challenging, but a necessity

  • Share expertise between FS and TMT
  • Partner with regulators and test your solutions/ideas

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Contact our UK FinTech Lead

Rav Hayer
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