UK BANKS RELY ON FINTECH FIRMS TO OVERCOME LEGACY SYSTEMS

Legacy systems are preventing nearly two thirds (61%) of commercial banks from developing Fintech applications, research commissioned by Fintech provider Fraedom has revealed.

The study polled decision-makers in commercial banks including senior managers, middle managers and shareholders.

The research discovered that while inefficient systems are proving most prohibitive in terms of Fintech development, a lack of relevant expertise and access to resources are also significant stumbling blocks receiving 56% and 53% of votes respectively.

Kyle Ferguson, CEO, Fraedom, said: “The research highlights that legacy systems are the most common barrier preventing commercial banks from developing Fintech applications. Trusted Fintech firms offer banks the chance to overcome these in-house challenges and reap the benefits from technical applications that can lead to more revenue making opportunities.”

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It was also interesting to discover that Fintech providers were labelled more of a threat by a minority of senior members of staff in commercial banks, with 18% of shareholders believing that they pose a risk to the entire banking industry, a view that was held by just 8% of middle managers.

While a few members of staff are concerned by the rise of Fintech providers, the trend of outsourcing services to Fintechs is ever-present with only 26% of commercial banks not outsourcing any services. In the UK alone, nearly half (46%) of domestic respondents said their bank outsources payment solutions to Fintech providers.

“The commercial banking sector must become more efficient at adopting new technologies. Fintech firms can make a big difference to certain areas, such as commercial cards,” adds Ferguson. “Established Fintech providers are rich with technical expertise and have the in-depth knowledge of  local markets to successfully partner with banks, which is clearly indicated by the research results.”