As payment volumes rise and customer expectations harden, UK banks are under growing pressure to match fintech speed without compromising regulatory control. Modernising payments no longer means rebuilding core systems, but choosing where to add flexibility, resilience and pace without introducing new risk.
London’s banking sector enters 2026 from a position of relative strength. Business confidence in the capitalfinished last year at one of the highest levels in the country, with firms reporting rising optimism about both their own prospects and the wider economy. That confidence brings opportunity, but it also brings pressure. More activity means more transactions, and for banks the contest with fintechs is most visible at the moment a payment is made.
You do not lose customers because your balance sheet is weaker or your regulatory standing is questioned. You lose them when payments feel slower, more rigid or less predictable than the alternatives.
Where payment volume quietly leaks away
UK banks still dominate deposits and lending, but payments tell a different story. UK-issued debit and credit cards were used for 31.4 billion transactions in 2024, with card spending worth around £1 trillion across the year, according to industry figures. The biggest consumer-facing winners at the point of sale have been wallet-led experiences such as Apple Pay and Google Pay, alongside app-first brands that make everyday transfers and budgeting feel simpler.
At the infrastructure level, Visa and Mastercard account for the vast majority of UK card transactions, which is one reason fees, transparency and competition remain live issues for banks and regulators alike.
At the rails level, the UK has also seen steady growth in account-to-account tools built on open banking. Regulators reported around 13.3 million active open banking users by March 2025, a sign that Faster Payments and direct bank transfers are no longer niche behaviours. Cards still account for the majority of retail payments, but expectations around speed and visibility are being set elsewhere.
Legacy core systems were designed for stability, audit and control, not rapid iteration. Fintechs optimise at the edge. They reduce checkout friction, onboard merchants faster, surface clearer transaction data and respond more quickly when something goes wrong. That is where payment volume moves, often without customers making a conscious decision to leave their bank behind.
Adding capability without touching the core
One approach increasingly favoured by banks is to introduce modern payment capability as an infrastructure layer rather than attempting to rebuild core systems that were never designed for frequent change. In practice, this means using platforms that sit between legacy banking systems and newer payment channels, handling gateways, switching, fraud controls and reconciliation without disrupting regulated processes upstream.
Examples of payment solutions for banks follow this model by allowing institutions to add card-to-card transfers, instant payments, merchant payouts and dispute management through modular integration. The advantage is not novelty; it is predictability. New payment interactions can be introduced in weeks rather than years while customer accounts, audit trails and compliance obligations remain anchored inside the bank.
Three delivery models banks actually rely on
Most UK banks combine several approaches rather than choosing a single path.
Building entirely in-house offers maximum control and regulatory clarity, but it is slow and costly. Large institutions spend billions maintaining legacy IT estates, and delivery timelines often stretch beyond a single planning cycle.
White-label solutions offer speed. Banks can introduce new payment interactions without redesigning settlement logic or customer ledgers, provided governance and accountability are clearly defined.
Partnerships sit between the two. They allow banks to integrate specialist capability while retaining ownership of customer relationships and compliance responsibilities. The trade-off is architectural complexity rather than wholesale operational risk.
What matters is not the label but the sequencing. Incremental change reduces disruption and keeps regulators comfortable.
Omnichannel payments are where pressure builds
Customers no longer separate payments into online, mobile and in-store experiences. They expect continuity. A transaction that begins on a phone should reconcile cleanly with back-office systems and remain recognisable days later if queried.
This is where many banks still encounter friction. Channel-specific systems create fragmented data, slower dispute resolution and inconsistent fraud signals. By contrast, fintech platforms are often built around a single transaction view from the outset.
Modern payment layers address this by routing transactions consistently across channels, applying the same fraud logic and feeding unified data into reconciliation and reporting processes. For banks, the benefit is visibility without compromising control.
Compliance is not the constraint it is often made out to be
It is easy to frame regulation as the reason banks move slowly. In reality, UK requirements around safeguarding, AML and auditability are well established. The challenge lies in integrating new payment logic without undermining those controls.
Phased launches reduce risk. Sandboxed products allow banks to test new journeys with limited exposure. Clear separation between customer-facing innovation and systems of record preserves audit integrity while still allowing progress.
As transaction volumes rise alongside stronger market conditions, the cost of operational failure increases. That is why resilience continues to outweigh novelty in banking decisions.
Launching faster without increasing regulatory risk
If you are responsible for payments strategy, speed still matters. The difference is how it is achieved.
Banks that move fastest tend to focus on narrow use cases first. They introduce new payment methods to defined customer segments, monitor performance closely and scale only once controls prove robust. They also invest early in transaction oversight and reporting rather than treating them as secondary concerns.
The result is momentum regulators can follow and customers can trust.
Competing on experience rather than reinvention
UK banks are not short of capital, data or credibility. The competitive gap in payments comes from how quickly those strengths translate into customer experience.
You do not need to rebuild everything to close that gap. You need to modernise deliberately, layer by layer, with a clear understanding of where speed improves outcomes and where stability protects you.
In an environment where confidence and transaction volumes are rising together, the banks that succeed will be those that modernise payments without losing sight of why customers trusted them in the first place.
