UK Finance & Fintech Predictions 2025: Operational Resilience, Payment Innovation & Customer Retention

In my previous article, I delved into UK fintech predictions, highlighting trends in Artificial Intelligence and Security. This time, I’ll shift the focus to the intersecting challenges and opportunities within Operational Resilience, Payment Innovation, and Customer Retention. 

Operational resilience

Operational Resilience isn’t new. Financial institutions have spent significant time and effort evaluating their Important Business Services, ensuring that their processes and technology solutions are resilient in the face of a variety of business impact scenarios. In 2025, the focus for Operational Resilience will extend beyond its current boundaries.

While 2025 heralds the March regulatory deadline, Operational Resilience is no longer a ‘program of work’ to meet a regulatory ask, but an ongoing commitment to ensure resilience is embedded into the fabric of the organisation. With this in mind, attention is turning to the third-party suppliers of technology to equally demonstrate the same level of resilience to ensure financial institutions are truly resilient end-to-end.

From January 2025, new UK regulations come into force to ensure “Critical 3rd parties” are subjected to the same level of Operational Resilience scrutiny as the financial institutions themselves. While there is specific criteria around the definition of Critical vs Significant suppliers (and the implications of such designations) this new focus on suppliers will undoubtably have a ripple effect to the majority of FinTechs who provide their services to finance companies.

For larger organisations who provide vital infrastructure to the banks e.g. cloud providers, this new regulatory focus will no doubt be welcomed and accommodated. It is therefore the small to medium FinTechs that will have the greatest impact.

From 2025, it is likely that FinTechs, regardless of their regulatory grading, will be approached by multiple financial clients to demonstrate robust operational resilience measures, as their clients have been conditioned to critically evaluate the resilience of their services and expect their suppliers to do the same. As banks have embedded their own operational resilience practices, there is a potential for FinTechs to be exposed to multiple varying requests and forms of evidence. This potential increase in compliance burden for FinTechs will likely create higher operational costs.

In order to meet Operational Resilience demand, some Fintechs may need to invest heavily in business process optimisation, risk and control evaluations and technology resilience reviews, security reviews and greater observability solutions. This investment is likely to be significant, leading to a potential reduction in innovation expenditure.

Payment innovation

Cross border payments: Demand for cross border payments continues to increases at a rapid rate, fuelled by a global expansion of e-commerce solutions, a rise in global workforce mobility and an increase in international trade. According to the Bank of England, the value of cross-border payments globally is forecasted to increase from almost $150 trillion in 2017 to over $250 trillion by 2027.

Despite the increase in demand, the ability to facilitate cross border payments in real-time remains a challenge due to the variety and complexity of local payment solutions and regulations. In 2025 we are likely to see a roll-out of some real-time (or near instant) solutions in specific economic areas such as the EU. In parallel, central banks will continue to invest in Central Bank Currency solutions to accelerate future cross border payment coordination.

IoT initiated payments: In 2025 we should see an increase in touchless automated transactions from IOT devices. Smart appliances are not new, but automated payments (potentially with pre-approval userparameters) will accelerate in use case and adoption. 

The most significant adoption of this technology will be in automotive. Through connected car technology, there is a wealth of use cases for in-car payments (fuel payments, parking charges, smart ordering of consumables and parts) and it is likely we will see payment providers integrating their technology and forming partnerships with the big automotive software providers and ignite a wider innovation for embedded payment solutions. 

Customer retention and the ambition to be ‘prime’

Increased competition has flooded the market: In the UK, the retail banking market is ultra-competitive. We have already witnessed a significant wave of digitalisation, where traditional banks and neo-banks have raced to get their products and services accessible on digital channels. There is now a significant amount of customer choice. With an increase in consumer confidence and competition awareness, customers are more likely to choose multiple banks for their financial needs and are willing to switch for a better rate or customer service.

The growth of Neobanks: Last year, neo banks built on their strong deposit books and diversified their product portfolios by integrating lending, wealth management and trading services. Neobanks on the whole have diversified their product offering significantly and have attracted substantially morecustomers in 2024 and this will continue to grow in 2025. According to FinTech global, In the first half of 2024, UK neobanks added approximately 9.5 million new Android users, 81% more than the 4 million new users garnered by legacy banks.

Customer retention: Neobanks have focused on the promise of a better user experience, but with customer loyalty to any one provider at an all-time low, customers are continuing to bank with multiple providers. In order to attract and retain customers, banks and neobanks have historically relied on product incentivisation and reward tactics. Products that have been packaged together with multiple benefits and payback schemes. It is likely these tactics will continue but we are seeing a rise in the fees being charged to keep these schemes profitable. Due to regulatory scrutiny of packaged products, there is little wriggle room for what these can offer. Instead, banks will be thinking more long term at their customer retention strategy.

With an increased focus on customer retention,are we seeing a new type of demand from customers that has yet to be tapped into ?…..The trusted advisor.

Owning the customer relationship: Even with the growth of neobank competition in the market, they are only at the early stages of capturing primary banking relationships. According to a recent Statista forecast, “approximately 10% of UK respondents indicated a high likelihood of changing their primary bank in 2024, implying that a substantial majoritywill remain with their current primary banking institution”. 

Having the ‘primary’ relationship is key to achieving sustainable profits and growth. Having the primary relationship should no longer be regarded as the default position for traditional banks; instead all banks need to earn the right to be prime by putting the customer front and centre across all product offerings and providing a joined-up, value-added experience for the customer across their entire financial journey.

A key strategy in 2025 will be in earning this right to be ‘prime’ by providing a trusted advisor experience for customers. An experience that goes beyond today’s product silo ’ed experiences and provides a deeper, more relevant advisory relationship. A relationship that earns loyalty, regains trust and stems the switching behaviour that has grown in recent years.

A balancing act in 2025

Across both articles, we have explored some of the most important areas of focus facing the finance and fintech industry. In summary, 2025 is going to be a pivotal year for customer retention and providing a high-value personal service is going to be a key differentiator.

Providing a personal service will require a constant balance between providing individual, insightful AI generated content and building the customer’s trust to share and manage their datasecurely through Open Banking solutions. Customers want to feel like both their financial welfare is being managed and advised at a personal level and that their personal information is continually secure at the highest level. Unlocking the ‘financial advisor in your pocket’ will be market differentiating and we look forward to seeing what comes next.

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