There were clear examples of banks reinventing themselves as digital businesses in 2014. The likes of Barclays and Royal Bank of Scotland (RBS) continued to focus on simplification of sprawling IT estates, while Nationwide gave a glimpse of the future of wearables in retail banking with its smartwatch app.

However, a tough regulatory environment showed no sign of abating, and the legacy infrastructure problems affecting the incumbent lenders lingered on.

So, alongside indications that mobile payments are finally set to enter the mainstream, the emergence of ‘digital-only’ challenger banks appearing on the horizon, and much more besides, 2014 was a busy year for financial services tech.  Here are some of the high (and low) lights of the past 12 months...

Legacy systems

Despite a concerted effort to address the tangled mess of IT infrastructure built up over years of acquisitions, legacy systems continued to grab the headlines.

In March, the Financial Conduct Authority – launched the previous year alongside the Bank of England’s Prudential Regulation Authority as part of new ‘twin peak’ regulation – kicked-off an investigation into the technology underpinning the financial sector, following a series of high profile outages in previous years.

However, the Bank of England was itself the target of condemnation later in the year as its CHAPS system - responsible for transferring trillions of pounds a year - was floored due to an IT glitch.

Meanwhile, a protracted investigation by the FCA into the Royal Bank of Scotland’s 2012 IT fiasco, which left millions of customers unable to access accounts, finally came to a close, landing the bank with a £56 million fine.

The dramas at the Co-operative Bank continued to rumble on too. A damning 152-page report by Sir Christopher Kelly in April lifted the lid on the beleaguered bank’s failed core banking system replacement, detailing management failings that contributed to the wider financial chaos at the firm.

There were signs that banks were making progress with their however, with RBS outlining plans to reduce its core banking systems from 50 to 10, while Barclays decommissioned thousands of servers as it aimed to cut costs and simplify its estate.

Digital innovation

Investment in digital began to move up the agenda for bank IT budgets during over the year. RBS revealed it would spend £1 billion on creating digital services, for example, but it was Barclays that took on the digital agenda with real intent.

The bank led the way with investments in a variety of technologies, following on from the success of its Pingit person to person payments app, which was used to pay a £23,000 house deposit in February.

Innovations included the launch of a biometric finger vein scanner to authenticate large transactions, a trial of beacon technology in branches, voice recognition for telephone banking, a mobile video banking service and the extension of a smartphone cheque imaging service to millions of customers. In addition, the bank also announced plans to transform its branch cashier role to iPad-wielding advisors, highlighting a trend among large lenders to continue to invest in shrinking branch networks.

Also, while mobile banking apps became ubiquitous across the industry, the focus of innovation began to shift to wearables, giving a glimpse of the future of personal banking. Barclaycard and Spain’s Caixa Bank revealed plans to rollout thousands of contactless payments wristbands, but it was Nationwide which claimed the real first mover advantage with the first fully-fledged smartwatch device, unveiled exclusively to ComputerworldUK.

However the digital revolution took its toll too – with thousands of jobs at ING and Lloyds cut as automation plans came into place.

Partnering with startups

A common theme throughout the year was financial services providers partnering with the startup community to help them foster innovation within their own company. With £300 million invested in fintech firms by venture capitalist over six months, the big banks accelerated their moves to partner with these agile firms.

HSBC announced plans to invest up to $200 million (£119m) in financial tech start-ups, while Santander created a £58 million fund, and foreign exchange firm Travelex earmarked £25 million to spend on startups in areas such as crypto-currencies, digital wallets and location-aware technologies.

Others such as insurance provider Aviva and Deutsche Bank planned to launch ‘innovation hubs’, with the German lender teaming with IBM and Microsoft to set up  labs in Berlin, London and Palo Alto. Proving that innovation is also happening outside of London’s Tech City, Barclays also launched an innovation hub in Manchester too.

Emergence of new players

One of the most intriguing developments of the year was the glimpses of new banks preparing to enter the market next year.

Metro Bank founder Anthony Thompson  revealed plans to launch Atom Bank, billed as the UK’s first ‘digital bank’, while former Allied Irish Bank chief operating officer Anne Boden and former IT worker Nazzim Ishaque also intend to create branchless lenders.

Atom also announced a partnership with service provider Fiserv, offering core banking services in the cloud to help lower infrastructure for the 25 new banks currently awaiting approval for banking license applications.

Meanwhile, there were indications that tech firms such as Facebook and Twitter would move further into payments, ramping up pressure on incumbents to improve their own services.

Mobile payments

Another area of innovation was mobile payments. The launch of Apple Pay in the US along with the latest iPhone promised to bring smartphone transactions to the masses at last, despite the technology being available through other handsets.

In the UK, plans to launch payments service Zapp continued, with more banks and retailers committing to the service, while Transport for London announced that it would let passengers pay for journeys on the London Underground with a swipe of their smartphone.

An industry-wide person to person payments initiative, Paym, also got off the ground, though some – such as RBS - were notable for their absence among those able to offer the service from launch.

However the picture was not so rosy for others attempting to enter the space. Weve, a mobile payments joint venture between mobile providers EE, Vodafone and o2, was scrapped before even launching, while o2 had already canned its own mobile wallet project earlier in the year.

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