As financial services providers and consumers face continued pressures from economic and market instability, FIS^®, a global leader in financial services technology, has fielded new research to explore how executives and consumers are responding to the environment, and how they’re making their financial or investing decisions.

FIS’ Financial Services Expectations vs Reality research asked consumers in the UK and US about how they are making personal financial decisions, and their expectations of financial service providers, including their banks. It also asked financial services company executives reciprocal questions about how, in reality, they are investing and innovating. 

The research found that financial services company executives in the UK are showing more resilience to market turbulence than their US counterparts. These findings come as the UK has experienced sharper rates of inflation that are still significantly higher than those in the US. Whereas the US saw its peak at 9.1% in June 2022, the UK saw its peak at 11.1% four months later in September 2022. Meanwhile, the UK is still experiencing a higher rate of inflation at 7.9% as of June 2023, compared to the recent drop to 3% in the US. 

How executives and consumers in the UK are reacting to economic headwinds compared to those in the US:

·       78% of financial services company executives in the UK say high interest rates are impacting their company’s ability to innovate or invest according to the FIS study.

·       In contrast, nearly all US-based executives in financial services surveyed (91%) said they were experiencing an impact from high-interest rates.

·       Consumers in both the UK and the US showed a similar level of concern over high-interest rates, with 76% and 77% respectively saying they have or will have an impact on their financial decisions.

Businesses in the UK are increasing investment at higher rates than in the US according to the research, but both are taking a broad-brush approach. On the other hand, consumers are clear on what they want to see from their financial services providers.

UK-based financial services executives are investing in AI at a faster pace than those in the US:

• 58% of UK financial services company executives are increasing investment in generative AI, compared to 45% of US executives. Similarly 56% of UK executives say they will invest in AI and machine learning technologies for process automation, compared to 51% in the US. 
• Large financial services companies (£10B+) in the UK are driving the bulk of investment across the sector; with 75% of executives from these firms focusing innovation efforts on the ease and speed of opening accounts, ahead of other priorities.
• Consumers, however, say their top two most sought-after features are an all-in-one platform for managing their financial services from all providers (44%) and the ability to quickly set up or apply for more complex financial services transactions, like loans and investments (24%).

“Across all negative market conditions respondents were presented with, UK financial services executives said they were less severely impacted than their counterparts in the US. This could be in part because the UK financial services sector is nimbler and more resilient to shocks, particularly given the current government’s efforts to stabilize conditions,” said Himal Makwana, Head of Platforms, Strategy, Operations & Venture at FIS. “With consumers showing significant concern about the state of the economy, especially higher inflation and interest rates, businesses are exploring how they can build trust with existing and potential new clients. Many of the executives we surveyed plan to do so with future-looking technology, such as embeddable financial services using APIs, blockchain and generative AI, to deliver advanced customer experiences.”

 “We are seeing a divide in how financial services companies are investing in new technology and what types of solutions consumers want most from their providers, according to this study,” added Makwana. “At the root of this gap between executive investment and innovation and consumer expectations seems to be the need for businesses to innovate through economic uncertainty. For example, many UK businesses are investing in automation and self-service, which can reduce costs while enhancing the customer experience. On the other side of the coin, consumers worrying about their finances are seeking personalized experiences and targeted services to make it easier to manage their money.”