According to the results of Payments Modernisation: The Big Survey conducted by Finextra Research and Volante Technologies, the UK financial services industry continues on a rapid, albeit challenging path of significant transformation.  

In this blog, we’ll explore some key findings related to payments modernization in the UK, including a persistent lack of confidence in meeting ISO 20022 compliance for cross-border payments, the impact of regulatory developments over the adoption of multi-cloud payment environments, and the disproportionately high investment of UK banks into modernization plans when compared with other regions.  

ISO 20022 compliance readiness

One of the most pressing concerns for UK banks is the migration to ISO 20022, the new international standard for electronic data interchange between financial institutions. In terms of readiness, confidence levels vary considerably depending on the application. For example, whereas 45% of UK respondents expressed confidence in their ability to comply with domestic clearing requirements, only 25% said they were confident in achieving compliance for cross-border transactions.  

Considering the deadline to implement ISO 20022 for cross-border payments is November of 2025, UK banks urgently need to overcome hurdles to implementation and compliance with the standard. In addition to identifying and investing in the correct technologies, this will require an overall keener focus among UK banks on ramping up standardization efforts to align with their more capable and confident international counterparts. 

Customer pain points

The ISO 20022 focus is especially important given that UK respondents see ISO 20022 transformation to synchronize messaging formats as their customers’ biggest pain point. This indicates clearly that ISO 20022 modernization is about more than just regulatory compliance, it is a customer retention and competitiveness play. 

Other high-ranking UK customer pain points, as reported by the financial institutions that serve them, are API integration with bank systems, the efficiency and speed (or lack thereof) of cross-border payments, and the speed of access to new payment services. Interestingly, the lack of extended/rich data around payables and receivables did not score high as a pain point, very likely because customers have become inured to the poor quality of payment data. This will likely change as more institutions start to offer data-rich services, exposing the weakness of competitors in those areas. 

UK banks and the cloud

Although a shift from data centers and private clouds to hybrid and multi-cloud payment environments has emerged as a notable trend across regions, the survey revealed UK banks to be an exception, with no respondents utilizing a multi-cloud infrastructure.  

While this is a curious anomaly on the surface, it should be noted that in October 2023, Ofcom referred the UK’s domestic cloud market to the Competition and Markets Authority (CMA), highlighting concerns around high data transfer fees, committed spend discounts, and technical restrictions hindering multi-cloud adoption. Additionally, the market may be challenged by broader increased scrutiny from UK financial regulators, who recently announced plans to directly oversee technology suppliers, to mitigate risks of disruption that could affect banks’ service capabilities and the wider economy. 

Accelerated investment in modernization

Given the unique challenges facing UK financial institutions, it should come as no surprise that their proclaimed investments in modernization were the highest of all respondents.  

More specifically, half of the UK banks surveyed said they plan to spend more than a million additional dollars on modernization, with 30% allocating between $3-5 million and the majority focusing their investments on deploying new technologies. Overall, this highlights an increasing sense of urgency in the region toward modernizing payment systems, indicating that changes implemented by UK banks over the next year are likely to be both widespread and significant.  

For access to deeper insights on what’s in store for UK banks, download the entire report.