Why UK banks are struggling to innovate faster
UK banks are facing an innovation crisis. Despite mounting pressures to adapt to evolving customer demands and the competitive financial services landscape, a significant number of institutions are struggling to meet pace of change.
According to a new report by SaaScada, Test More, Fear Less: The Case for Safer, Smarter Banking Innovation, many UK banks are impeded by outdated core banking systems, risk-averse cultures, and regulatory roadblocks—problems that hinder their ability to innovate effectively.
SaaScada’s findings reveal a stark contrast between the ambition of banking leaders and the reality of operational delivery.
The report, which surveyed 150 UK banking innovation leaders, highlights that 80% of respondents believe sluggish innovation is directly impacting their business’s growth.
While 69% say the pressure to innovate has intensified over the past year, almost 90% of them admit that they are being held back by legacy technology, regulatory compliance issues, and internal red tape.
“There is a growing gap between strategic ambition and operational reality,” said Steve Round, Co-Founder and President at SaaScada.
“The issue is no longer about having ideas for innovation; it’s about the ability to execute them fast enough to stay competitive in an environment where agility is essential.”
The report identifies several barriers that slow down innovation in UK banks, including delays in testing processes, issues with sandbox environments, and inefficient systems for managing new product launches.
According to the survey, banks are significantly hampered by slow core banking systems, with 62% of respondents attributing their lack of innovation to these outdated platforms.
One of the most pressing concerns raised in the report is the industry’s risk-averse culture. 71% of banking leaders cited this as a major barrier to fast innovation, with internal resistance to change often stalling progress.
“In many instances, risk-averse leadership is preventing banks from taking the necessary steps to experiment with new products or services,” said Nelson Wootton, CEO of SaaScada. “When banks play it too safe, they risk falling behind the competition and losing their relevance in the market.”
The report also uncovers a critical gap between strategy leaders, such as CEOs, and those directly involved with product development.
While CEOs and other C-suite leaders believe a new product or service could be launched in just 70 days, those involved in the day-to-day delivery of these innovations report a much longer timeline, with an average of 176 days required.
This disconnect between strategic expectations and operational realities reveals an industry still struggling to match its ambitious goals with its capacity to execute.
“While strategic leaders might think that launching a new product can happen in just over two months, the reality is that the operational hurdles—from technology to team collaboration—mean it takes much longer to roll out anything new,” explained Wootton.
To overcome these challenges, SaaScada’s report calls for a rethinking of core banking technology. 79% of innovation leaders believe that core banking migrations must be made less risky, or banks will continue to lag behind their competitors.
In particular, the report advocates for shifting toward a pay-as-you-go, consumption-based model for core banking systems, which would allow banks to experiment with new ideas without the financial commitment and risks of traditional migrations.
“Banks are still operating with core banking systems that were designed in an era where agility and speed were not a priority,” said Wootton.
“It’s time for the industry to adopt a new model that supports experimentation and agility, enabling banks to adapt quickly to changes in the market.”
Another key issue raised in the report is the growing talent shortage in the banking sector. As banks struggle to innovate, 73% of survey respondents say that the banking industry will never be a destination for talent unless it improves its innovation track record.
Young, tech-savvy professionals are increasingly seeking opportunities with companies that are pushing the boundaries of technology and digital transformation—areas where many UK banks are falling behind.
The research concludes with a call to action for UK banks: embrace core banking innovation or risk being outpaced by more agile competitors. SaaScada’s data highlights that banks that implement smarter, cloud-native systems will be better positioned to compete in an increasingly fast-paced market.
By empowering engineers to experiment without the constraints of outdated technology, banks can drive innovation while maintaining stability and continuity.
“In every other facet of the financial services industry, solutions follow a consumption-based model, letting users test new products before diving in headfirst. It’s time for core banking to follow suit,” said Wootton.
“By making this shift, banks can begin experimenting from day one without the delays and financial commitment that have long plagued the industry.”