Trust, not technology, is the real currency of financial services
Fintechs are under pressure from outages, data leaks and rising fraud. True financial innovation should make systems safer, more transparent and more reliable for customers, says Nick Murray-Leslie
Traditional banks and digital-first fintechs are locked in a battle for customers with much of the industry’s messaging still focused on AI, platforms and digital transformation.
But customers aren’t asking if their bank is becoming a fintech. They’re asking if their money is safe and whether their data is protected. The answer, too often, is “no”.
In the past week alone we’ve seen a glitch allowing Lloyds customers to view others’ details.
To make matters worse, Lloyds is working on a sweeping overhaul of its technology strategy as part of its ambition to become “the UK’s biggest fintech”.
This includes an ambition to reduce technology costs by 35 per cent, partly by selling anonymised customer data and automating compliance checks.
They say timing is everything but maybe learn to read the room? At a moment when customers are increasingly anxious about the safety of their financial data, announcing a strategy centred on monetising that data is hardly the way to reassure people.
“Becoming a fintech”, it seems, has become an end in itself.
The irony is that the banking industry has already spent the past decade losing ground to fintech challengers. Across Europe and the UK, digital banks and fintech companies have steadily eaten into the market share of traditional institutions.
Consumers frustrated with slow, bureaucratic legacy systems have migrated towards slick apps and faster services.
But the new generation of digital banks should not assume they are immune from the same problem.
A report from Bain shows that “traditional banks have slipped from capturing 95 per cent of the addressable revenue pool in the early 2000s to about 80 per cent today. By 2030, we estimate they could hold only 65 per cent, further ceding ground to fast-moving challengers emphasizing asset outperformance”.
In other words, traditional banks have lost a third of their market share in 25 years, largely to the new breed of digital challenger banks. All for the better? Not necessarily.
Building a digital-first bank is not the same as building a trusted one
Revolut is “still the worst UK firm for fraud complaints” according to Which? whose data at the end of last year revealed that Revolut customers referred more scam and fraud complaints to the Ombudsman than any other payment firm.
Of course Revolut is an amazing UK success story, but scaling at such a rate means issues are inevitable, compounded by the speed of that growth. Building a digital-first bank is not the same as building a trusted one. Yes, technology can make financial services faster and cheaper, but it can also introduce new vulnerabilities if security and governance are not built into the system from the start.
The problem is confusing innovation with improvement. Slapping a new app on top of a financial service does not automatically make it better. Nor does replacing call centres with chatbots.
True financial innovation should make systems safer, more transparent and more reliable for customers. That means using technology to detect fraud earlier, improve identity verification, and help customers understand and control their finances. It means designing systems that are resilient when things go wrong, not simply efficient when everything works perfectly.
This is where some incumbents appear to be losing the plot. Too many strategies focus on becoming “tech companies with banking licences” rather than banks that use technology intelligently.
Too many strategies focus on becoming “tech companies with banking licences” rather than banks that use technology intelligently
Technology should be the tool that strengthens trust, not a branding exercise designed to impress investors or analysts.
London became a global financial centre because institutions operating there were seen as credible custodians of capital and services. The fintech era should not change that principle.
Take the sheer scale of fraud across the financial system, which underlines the stakes. Consumers lost £1.17bn to fraudsters in 2024 alone, according to industry figures. For victims, these incidents are not abstract statistics. They are deeply personal financial shocks that can destroy savings and livelihoods.
If the UK wants to maintain its position, the industry needs to remember the trust that made British financial services globally competitive in the first place.
You cannot simply declare yourself a fintech and expect customers to be impressed. Technology must deliver better security and better service or customers will move their business elsewhere.
Banks and fintechs can do a lot to rebuild trust through how they communicate, not just what technology they build. The core problem is that the industry often talks about innovation, while customers care about safety, reliability and accountability.
For centuries, banking has run on the contract of trust. Customers deposit their savings believing that the institution holding it will protect and safeguard their money – and data – and act in their interest.
Increasingly, consumers are questioning whether banks both old and new are genuinely capable of protecting their money and their data. It’s up to the people and technology powering both models to prove they can earn that trust.
The communications strategy needs to shift. For banks and fintechs, messaging should lead with security, transparency about data use and communicate fast and clearly when systems fail.
In banking, just as in any sector, reputation takes a long time to build and minutes to lose.
Nick Murray-Leslie is CEO of Chatsworth