UK banks warn firms could become irrelevant without digitisation
Over half of UK banking and finance executives believe companies that fail to digitise their back-office operations now could face permanent irrelevance in a rapidly evolving industry landscape, according to new global research.
The findings from a study conducted by HFS Research in partnership with Iron Mountain indicate growing concern among senior leaders in the banking, financial services, and insurance (BFSI) sector regarding the pace and scale of digital transformation, particularly in back-office functions.
The research surveyed more than 500 senior executives from BFSI companies across the UK, US, Canada, France, India, Brazil, and Australia. Its outcomes highlight both an urgent need and considerable obstacles faced by firms targeting digital change in their operations.
UK focus
According to the report, UK financial services firms feel an acute need to overhaul their back-office capabilities to stay competitive. The study notes that 50% of respondents believe the traditional back-office will no longer exist in its current form within three years, while 33% anticipate either notable workforce reductions or a shift in roles as digital transformation and AI technologies become more prevalent.
Among those surveyed, 45% said their workforce is only partially ready for a digital transformation, emphasising a significant requirement for further training. The integration of generative AI remains limited in the UK, with just 22% of executives reporting company-wide deployment to date.
Global ambitions and roadblocks
Globally, the drive for a fully digital back-office is gaining momentum. The research reveals that 58% of BFSI organisations globally have pledged to achieve a complete digital overhaul within 24 months as they look to eliminate outdated, paper-centric processes.
Financial investment is also on the rise, with firms allocating an average of USD $25 million per organisation towards digital back-office transformation over the next two years. The majority expect to see a return on investment in less than two years.
The idea of a 'zero office' - an entirely digital back-office - has wide support, with 77% of surveyed executives predicting its arrival within three years. However, only 21% of organisations report undertaking significant efforts to reach this milestone, with many remaining reliant on legacy systems and manual workflows.
Workforce readiness emerged as a central challenge in the findings. Just 27% of companies globally feel their employees are adequately prepared for AI-driven, prompt-based operations. Notably, the adoption of AI is perceived as pivotal, yet only 13% of surveyed organisations have rolled out AI technology at scale, exposing what the report calls an ambition-execution gap.
While 81% of leaders expect AI agents to soon handle more than 75% of routine tasks, most firms are still grappling with resource, cultural, and compliance concerns that inhibit broader implementation.
Compliance, risk, and record-keeping
The study points to compliance as a priority driving digital transformation. 72% of respondents indicate a commitment to phasing out physical document storage, yet only 34% are confident they can fully digitise sensitive materials while meeting regulatory standards. Meanwhile, only 31% of organisations currently possess predictive, real-time compliance monitoring capabilities.
For those advancing most rapidly, tangible benefits are being realised. Leaders in digital transformation, termed in the report as "Radical Transformers", have reported revenue growth rates between 1.5% and 2.5% higher than more cautious peers.
The research underscores not only the urgency of transitioning to digital operations in the BFSI sector but also the complexity of achieving that goal on a broad scale.
