The financial services industry is undergoing rapid transformation driven by regulatory changes, technological advancements, and shifting customer expectations. This evolution emphasises the need for banks to:

  • Modernise legacy systems
  • Leverage AI
  • Adopt agile strategies
  • Democratise wealth management

Banks must embrace innovation to remain competitive. By modernising infrastructure, integrating artificial intelligence, and adopting agile methodologies, they can meet the demands of an increasingly digital and customer-centric market.

Lingering legacy technology issues

As detailed in the BJSS report, ‘Embracing Tomorrow: Insights for Anticipating and Thriving in an Uncertain Future’, 83% of organisations lack a future-focused strategy. This applies to the finance industry.

Banks usually have a short-term perspective because their decision-making is influenced by the overall condition of the financial market, which is affected by macroeconomic factors. However, many established banks are using legacy tech, creating silos within the business. This makes it difficult for them to comply with regulations, manage fraud risk, ensure security, and meet customer needs. For instance, nearly two thirds (64%) of retail banks’ IT budget is spent on maintenance.

Banks face challenges in modernising their legacy systems due to:

  • High levels of regulations
  • Substantial technical debt
  • Security risks
  • Capability gaps

Legacy technology is a significant hurdle for banks, often slowing response to market shifts and customer needs. Modernising these systems would free banks from operational constraints, enabling them to implement customer-facing innovations like AI-driven services and more efficient data handling.

Though fully cloud-based operations may not be feasible for all banks due to the sensitivity of their data, many banks are exploring hybrid models. Some banks, such as digital-first institutions like Monzo have leveraged cloud capabilities more extensively, often benefiting from agile infrastructure.

AI-powered banking solutions

AI applications in banking can be transformative, enhancing customer experience through virtual assistants that reduce wait times and improve query handling. AI technologies could also bolster fraud prevention by analysing data patterns in real-time, issuing prompt alerts, and identifying suspicious transactions.

The potential for AI to aid in regulatory compliance, such as adhering to the Digital Operational Resilience Act (DORA) and the Basel III framework, is another key area; with vast amounts of documentation, AI could help sift through updates, ensuring that risk and compliance teams remain current on industry requirements without unnecessary manual labour.

Improving long-term resilience with agile strategies

To build long-term resilience, organisations in the financial services industry may benefit from adopting a startup mentality, embracing a ‘fail-fast’ approach that allows them to quickly validate new ideas and respond more dynamically to market demands.

In practice, this would mean banks could test pilot programs on a small scale, gathering customer feedback and iterating before a full rollout. This shift in approach would not only help to keep banks aligned with customer needs but also foster a more cohesive organisational culture by emphasising shared goals.

For example, HSBC’s internal ‘Energise for growth’ pillar focuses on fostering unity and engagement across its workforce, highlighting the importance of diverse perspectives at senior levels to drive strategic alignment and operational efficiency.

Adopting an agile mindset, alongside cultivating a sense of unity and ensuring all employees are aligned with the organisation’s strategic objectives, can enable banks to stay competitive and adaptive in a dynamic environment.

Democratising wealth management

As banks look toward the future, they are also increasingly focused on wealth management, a sector with growing demand among a wider demographic. With consumers becoming savvier about their financial well-being, banks see an opportunity to provide personalised advice and investment services that were previously limited to high-net-worth individuals.

Platforms like Nutmeg have set a high bar with their low fees and user-friendly digital experiences, pressuring traditional banks to improve their offerings. Ensuring these services are accessible and engaging is not only a customer demand but a key to future market differentiation.

As financial services evolve, partnerships with innovative technology providers will be essential. This collaboration allows banks to leverage specialised expertise in areas like user experience and cybersecurity.

For example, HSBC's emphasis on partnering with innovators illustrates a shift from traditional service models to ones that integrate more personalised, tech-driven solutions. In doing so, banks can establish a unique value proposition that goes beyond cost, positioning themselves as customer-centric, innovation-ready institutions.

Balancing technology and human touch: the future of financial services

The future of financial services hinges on embracing both technological and cultural shifts. Whether through AI, modernising legacy tech, or renewed focus on wealth management, banks must adopt agile strategies to remain competitive and resilient.

Balancing the digital with the human aspect — providing customer-centric services, maintaining stringent security, and ensuring a cohesive internal culture — will be essential for navigating the industry's future.

BJSS is helping financial services organisations thrive in a fast-evolving industry. From modernising legacy systems to deploying AI and cloud solutions, our innovative strategies drive growth, enhance customer experiences, and improve resilience. Contact us to learn more and start your journey today.