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The United Kingdom—a country with an extensive history and far-reaching influence—finds itself at the heart of banking and finance. The young British banking sector is a hybrid of century-old institutions and state-of-the-art financial technologies, making it one of the most competitive in Europe. In this post we discuss the history and trends of UK banking.
The Evolution of UK Banking
Its roots stretch all the way back to Medieval times in Britain where goldsmiths began retaining deposits and making loans. Industry really got under way in the late 17th century, when the Bank of England was founded in 1694. With that, the now-prolific banking system found its roots and has since developed to become one of the most advanced in existence.
Key Milestones:
Opening of the Bank of England, second oldest central bank in world (1694)
1865: Barclays (UK branch) — historically significant British retail bank.
Lloyds Bank formed in 1896 – still a key retail and commercial banking player today
The year 1967: Barclays opened the world’s first ATM, with customer access to cash something that was completely new.
UK Banking Sector Structure立体图.
The UK banking sector is a ragout of traditional high street banks (TSB, Lloyds Banking Group or RBS), challenger [a]banks and the continuously growing number of FinTech companies.
High Street Banks
These are the large names with numerous branch offices throughout every city of America. They include:
Barclays
HSBC
Lloyds Banking Group
NatWest Group
Challenger Banks
Unfortunately, things changed in the past few years with more competition and innovation happening on challenger banks. They tend to be relatively more flexible and customer-friendly. Examples include:
Monzo
Starling Bank
Revolut
Fintech Revolution
London is home to one of the biggest fintech ecosystems in the world and UK serves as a few global leaders when it comes to this innovation. This sector is incorporating technology to provide the new financial services and products. Top fintech companies include:
TransferWise (now Wise)
Zopa
OakNorth
The Bank of England
The Bank of England is a key driver in the UK banking system. It is the central bank that does monetary policy, issues currency and takes care of reserves. One of its main roles is to set the base consumer interest rate — which affects how much it costs to borrow and save money.
Current Trends in UK Banking
In the UK, there are a number of very large trends in motion for banks that will affect how this industry looks.
Digital Transformation
Online and mobile banking services have grown quickly within digital banking as consumer behaviors shift. Traditional banks are spending billions on technology to adapt flow improvements that consumers expect out of a digital-first experience.
Open Banking
Open Banking — kicked off in 2018 by the CMA, Open banking requires banks to share customer data with third-party service providers. The result has been a wave of new financial offerings, services and products aimed at consumers trying to get their finances under control.
Sustainable Banking
Growing importance of ESG factors As a result, banks are concentrating on sustainable lending and green initiatives to combat climate change.
Regulatory Changes
In the meantime, Brexit led to a whole bunch of regulatory calibration as UK regulators sought to keep their financial services sector competitive (but also secure) in an ever-more-divided post-Brexit world. The sector continues to be regulated by The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).
While the UK banking system is strong, there are many things to keep in mind and work on: economic uncertainty – the economic issues, such as Brexit and the COVID-19 pandemic, continue to create uncertainty; cybersecurity – the technological development supports the growth of digital banking but creates the necessity to invest in cybersecurity to avoid data breaches and fraud; competition from Fintech – as technology changes, the traditional banking approaches are no longer reliable. The future of UK banking is exciting, as well. Some of the things to follow include Artificial intelligence. AI will be actively used in banking to enhance customer service, enable fraud detection, and promote the development of personalized financial offers. Blockchain and Cryptocurrencies. The financial sector will utilize blockchain to simplify their operations in payments, clearing, and settlements. Moreover, cryptocurrencies and central bank digital currencies have been a topic of scholars’ and practitioners’ huge interest. Enhanced customer experience. As always, customer experience enhancements will play a significant role in banking development. Banks will need to offer even more personalized services, improve the quality of service, and create expectations. Thus, the UK banking system is an integral part of the global financial system, cherishes the heritage, but moves forward with the changes. Everyone, from a regular online banking user to a financial expert needs to integrate this knowledge into their understanding of the financial world.
