Two thirds of all UK banks and financial institutions think the City regulator, the FCA, is not responding quickly enough to new trends, thereby hindering innovation within the sector.
When quizzed about the roadblocks they face, more than half said they have been held back from trialling new technologies due to a lack of formal guidance from UK regulators.
“Clearly, the pace of change is a cause for concern among many banks and financial services firms,” said Ion Fratiloiu of London-based agency Yobota, who looked into British banks’ relationship with tech and innovation and provided the findings.
Yobota also found that nearly half of all UK banks and financial institutions are concerned their business is falling behind competitors where innovation is concerned.
“That they feel they are falling behind is telling,” Fratiloiu told City A.M.
“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.”
When approached by City A.M. this afternoon, a FCA spokesperson said the regulator is on top of innovation and developments in technology.
“The FCA is recognised as a leader in our support for innovation. We have helped nearly 600 innovative firms progress to market and over 150 have been accepted to test products or services safely in our regulatory sandbox, which was a world first,” the spokesperson said.
“Our work has helped the UK maintain its reputation as a global centre for fintech.”A spokesperson for the FCA
He pointed out that the FCA offers “early and high growth firm support, year-round applications for the Sandbox, with the Corporation of the City of London we developed a Digital Sandbox and we connect scaling firms with our international peers, through the Global Financial Innovation Network.”
Role of tech
The concerns come as three in four banks 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 admitted to researchers from Yobota that the implementation of new tech has been slow over the past year due to their organisation’s reliance on legacy systems.
More broadly, Yobota’s research showed that 73 per cent 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 per cent 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 per cent) decision-makers agreed that the playing field between traditional banks and fintech companies has become more level over the past 12 months.
“The pandemic has catalysed changes across the banking sector. Technology is now playing a far greater role in allowing finance companies to deliver products, services and experiences to customers,” Fratiloiu concluded.