Spending by financial services companies on improving customer interfaces may be coming at the expense of investment in crucial back office IT systems, according to Pinsent Masons.

The law firm found that just two per cent of those firms it surveyed have prioritised investment in back office technology over the last three years, whilst 77 per cent have prioritised investment in enhancing customer experience.

This comes as Financial Conduct Authority research recently showed that the number of IT failures at UK financial services firms has increased 138 per cent over the last year alone, to 600.

MPs have also been vocal in urging financial services companies to invest more in back office technology in order to better protect consumers, with an inquiry by the Treasury Select Committee launched in November into IT failures in the sector.

Alexis Roberts, head of financial services and a partner at Pinsent Masons, said that financial services companies can be seriously undermined by underinvestment in the back office.

“The race to capture market share through customer friendly technology is, understandably, very important but that shouldn’t be at the expense of essential architecture.”

Pinsent Masons suggested that firms now see acquiring new technologies as the most important objective of merger and acquisition (M&A) activity, more so than increasing market share or expanding into new product lines.

Over the next three years, 70 per cent of financial services see acquiring new technologies as the most important objective of M&A activity, up from 58 per cent over the past three years. Meanwhile, only 46 per cent see increasing market share as the most important, down from 50 per cent.

Roberts stated that effectively harnessing the power of technology is key for M&A activity and organic growth – across the entire financial services sector, not just FinTech.

“In crowded markets, financial services companies that fall behind in developing and using technology will find it difficult to keep up,” he continued. “Although M&A remains a popular method for growth, we are increasingly seeing financial services companies enter into alliances and joint ventures which give them exposure to new technologies without the same commitment as M&A.”

Share Story: