The UK has made itself a centre for innovative technologies which evolve, disrupt and drive the global fintech ecosystem.

This is an extract from the recently published report, 'The Future of UK Fintech - 2015-2035'. 

The UK fintech environment provides a perfect recipe to help foster innovations which are transformative, as well as impactful. The UK fosters technological innovation through academia working with industry, backed up with government grants. Adding to this, the regulators are willing to collaborate with the sector to accelerate go-to market for fintechs, while making informed decisions about the legislation they create.

At NayaOne we are able to see all sides of the industry, helping enterprises work with fintechs, helping enterprises adopt emerging technologies, and helping fintechs navigate the enterprise.

Reflecting on the biggest disruptor technologies in UK fintech from the last ten years, I know for sure that technologies will continue to disrupt.

Technologies which changed UK fintech

When technologies are seen as transformative, it is important to look not only at the technology but its impact. There are technologies which have been launched within the last 10 years and have been disruptive, but their full impact has not yet been seen.

Banking APIs and open banking, machine learning and AI, cloud banking, blockchain, chatbots and automation, and the progress we're making on the quantum side, those are all transformative technologies.

The use of open banking and open APIs by banks has had a huge growth impact on the UK fintech sector. This is especially true since the pandemic, where banks have been able to build solutions to help the consumer outcomes. This has also been driven by regulatory frameworks which have supported the development of open banking.

Cloud banking is another technology which has been truly transformative to the UK fintech landscape. The use of cloud infrastructure has been foundational in sprouting the number of fintechs we have today. The industry will continue to mature around this. Many moved to the cloud as a cost-efficiency play, but we may start to see that as this becomes less cost-effective, financial institutions will pick and choose what goes on the cloud.

Finally, machine learning has already made a notable impact on the running of fintechs, allowing for automation an internal efficiencies. As machine learning develops to become artificial intelligence (AI) and generative AI, this impact will only increase. The exponential development of AI technology and the introduction of generative AI and ChatGPT to the general public in 2022 have set out what will likely be a new watershed moment for the fintech sector.

Which technologies will disrupt UK fintech?

Embedded finance is a technology which is likely to cause serious disruption to UK fintech in the next 10 years. This technology is really part of the next stage of open banking. Now that open banking  infrastructures are being accepted as standard, companies will look at how they can apply that technology to open banking. Every company will become a fintech, offering serious disruption in fintech but also the sector as a whole.

Blockchain has been a transformative technology, but I don’t think the impact of it has been fully realised on the fintech side. I have seen some great uptake in blockchain over the last 10 years, but as money moves towards the digital we will see greater application of blockchain across different use cases. We will start to see a bridge between enterprise and the crypto side of things, so interoperability between private tokenisation and public tokens.

AI and generative AI is a technology which the financial sector is just beginning to dip its toes into, but already it is becoming transformative. A lot of organisations are getting comfortable with AI and starting to play with how to adopt it in genuine terms. Over the next 10 years we will see these technologies and there applications become embedded as part of the business as usual. As they become the norm, we will see increasing numbers of use cases.

Data analytics integration is another area which is ripe for disruption. This is having your whole data stack and analytics insights at your fingertips. Generative AI can help accelerate this, not just by providing better analytics, but also by allowing the large language models to get trained and get better.

With all this innovation, we will also see increased and greater development in cybersecurity. Security in financial services is paramount. Cybercriminals are never idle so as we evolve our technology and business models, so do they. As reliance on technology grows, there will be an increased need for efficient application of cybersecurity.

New technologies provide new risks

Many of these technologies are fairly new and that means there has not been long-term testing or observation.

It’s difficult to predict what will happen 10 years down the line how people will implement and adapt to these technologies. This means that the use of guardrails, sandboxes and regulations are important in making safe systems, this is especially for AI and generative AI.

AI is likely to play a significant role in transforming the UK fintech sector, with applications across operational efficiency, innovative products, personalised services and tackling financial crime. The safe and responsible deployment of AI requires consideration of regulatory expectations for as well as safety, security, robustness, transparency, explainability, accountability, governance, and bias.

One thing which can help mitigate this risk is the provision of sandboxes for fintechs to test AI models they are developing, and validate them against internal and regulatory policies. AI and generative AI run risks such as bias and hallucination, which can be extremely disruptive if not weeded out.

Allowing technologies to change UK fintech

With any new technological development, there will always be an inherent resistance to change which can act as a barrier. Regulation can help the industry embrace technologies, as we have seen with open banking, but it can also act as a hindrance. We have already seen a number of banks move their heads of digital assets to other jurisdictions, so care must be taken to embrace different technologies through regulation to encourage growth.

Moving forward with these technologies, it’s important that we are able to embrace their full potential. This may require testing this technology to make sure it is safe, ethical and useful for customers