UK financial institutions will use new technology to tackle the impact of rising costs, according to a new report from Lloyds Bank.

Three-quarters (75%) of UK financial services firms expect their operating costs to increase over the next 12 months.

When asked how they plan to manage the impact of rising costs, the majority (72%) said they planned to invest in new technology to make their business more efficient.

Investing in technology was the most popular strategy cited by firms, ahead of absorbing costs (46%) and increasing the price of their products or services (38%).

Financial services firms’ wider technology investment plans also remain robust against a challenging economic backdrop, with more than two-thirds (71%) planning to grow investment in their technology systems and core platforms over the next 12 months.

When asked about specific technologies, firms said they were prioritising investment in the Cloud (79%), payments (69%), APIs (66%) and data science, which includes machine learning and artificial intelligence (61%).

The findings are included in Lloyds Bank’s seventh annual Financial Institutions Sentiment Survey, which gathers views from major banks, asset and wealth management firms, insurers and intermediaries across the UK.

Steve Everett, Managing Director, Head of Payables & Receivables, Lloyds Bank Commercial Banking: “It’s encouraging to see that so many financial services firms are alive to the potential for technology to increase efficiency as they, like so many other businesses, combat rising costs in a challenging economic climate. 

“But that is, of course, not the only reason financial institutions are investing in new forms of technology. APIs, for example, is being used by firms to improve client experiences in a range of areas – notably in payments – which make the customer journey more seamless, allowing the client to self-service and customise the interface to their needs.”

UK financial services firms cold on crypto 

Meanwhile, only a quarter (23%) of financial services firms said they believe the UK should become a technology hub for cryptocurrencies, with almost two-thirds (60%) expecting the value of the global market to fall in the next 12 months.

Peter Left, Head of Prudential Liquidity Management, Lloyds Banking Group, said: “We can expect a lot of crypto tokens to disappear in the coming months and years. But it's the technology and not the tokens themselves that's the real value add in the crypto space. The mechanism using Distributed Ledger Technology (DLT) that's been built to facilitate cryptocurrencies is powerful.”