Tech companies are seen as a big competitive threat to banks, which fear customers will prefer the financial services on offer from the trendy Silicon Valley firms
British banks are hiking their technology budgets in an effort to overhaul outdated IT systems and to prepare for battle with the tech firms, like Google and Apple, that are entering the financial services market.
Tech firms are seen as the biggest threat to banks by 27pc of senior bankers around the world in a survey carried out by software firm Temenos.
The study found that 58pc of senior bankers expect to spend more on IT this year, the highest percentage since the annual survey began in 2008.
Apple launched a payments system called Apple Pay earlier this year. This allows customers to swipe their iPhone rather than a bank card to make contactless payments, when making small payments in shops or on the London transport network.
And Google’s Wallet lets customers buy goods and services online, and transfer money in a similar manner to an online bank account.
So far most tech firms in the market are targetting specific parts of the finance market, such as Paypal focusing on payments, rather than tyring to operate as a full bank.
However, new lenders like Atom Bank want to offer a range of accounts, savings and loan products entirely through mobile apps in a new mix of banking and tech services.
If banks want to compete with the slick service offered by technology companies, they face various internal hurdles as a result of the existing operating systems built up over their long history.
Many large banks use a range of different IT platforms. One of the biggest barriers to improving technologically is those legacy systems, with 27pc of top bankers citing this as the key problem, while 33pc said a lack of budget resources was the main difficulty.
Banks are also struggling to keep up with the rise in mobile and tablet devices, as well as wearables such as the Apple Watch, with 19pc saying this is the big problem for their banks.
Traditional lenders are also worried that tech companies can focus on some of the more lucrative parts of the finance industry, without bearing the costs of the less profitable, highly-regulated sections of the business .
“Banks are upping investment, especially in technology. It appears that banks recognise the importance of technology to deliver a more intimate customer experience and to counter the threat from a more competitive environment,” said the report.
“On a less positive note, many critical issues have so far failed to make the [top executives’] agenda and banks are finding it harder to attract and retain the right talent.”
This article was written by Tim Wallace from The Daily Telegraph and was legally licensed through the NewsCred publisher network.