A new report by data-driven core banking platform SaaScada has found that UK banks are falling behind FinTech challengers in adopting AI with legacy systems, poor data quality and regulatory uncertainty among the biggest barriers.
The report, AI in Banking: Big Ambitions, Broken Foundations, surveyed 150 UK banking innovation leaders and revealed a stark gap between AI’s potential and its implementation. Although 80% of IT leaders believe the financial sector is well positioned to benefit from AI, just 55% of banks have actually deployed it.
The research found that 63% of respondents think AI in finance is “going nowhere fast” without real-time access to quality data, while 79% agree that strong data foundations are essential to compete in an AI-driven world. Legacy technology is also a major roadblock, with two-thirds (66%) of participants likening the attempt to run AI on outdated systems to “fuelling an EV with petrol”. As a result, 79% said FinTech challengers are “racing ahead” thanks to their more modern infrastructure.
SaaScada president and co-founder Steve Round said, “AI isn’t magic. It’s maths, data, and timing. If your systems can’t deliver the data when and where it’s needed, no amount of clever tech on top will fix it. The banks that invest in a modern core now will be the ones leading the AI revolution tomorrow. Ultimately, you can’t build the future on foundations from the past.”
The study also revealed widespread uncertainty around regulation. Nearly two-thirds (63%) of banking IT leaders said the possibility of additional compliance requirements discourages AI adoption, while 68% believe regulatory ambiguity is putting implementation “on ice”. Despite this, 67% of respondents agreed that stricter oversight is a worthwhile trade-off for ensuring trust and accountability, and 54% expressed confidence in the Financial Conduct Authority’s (FCA) approach to mitigating risks like bias and privacy breaches.
SaaScada co-founder and CEO Nelson Wootton said, “The FCA isn’t going to reinvent the rulebook for AI and nor should it. It’ll fold AI into existing principles and judge firms on outcomes. That’s the right approach. The guardrails already exist, and waiting for new rules is just an excuse not to act. Banks burying their heads in the sand are missing the point – AI won’t just need compliance, it’ll assist with compliance. But only if they get their act together on data.”
Although 81% of respondents expect AI to have a major impact on banking, opinions differ on when this will materialise. About a third (32%) said the impact is already being felt, while 28% expect it within a year. One in five (21%) believe it will take several years before the industry embraces AI fully.
Currently, most AI efforts focus on lower-risk, customer-facing tools such as automated savings and smart bill management. The top risks identified by banks include data breaches, skills shortages, and bias in credit decisions. Meanwhile, the key factors cited for driving AI success are regulatory clarity, improved data quality, and seamless integration with core systems.
“It’s Groundhog Day. A new technology comes along, and banks rush to bolt it to the front end, calling it transformation. But until they do the hard work of modernising the core, it’s just lipstick on legacy,” Wootton added. “If your plumbing’s broken, painting the door red won’t fix the leaky tap. The real benefits of AI will come when it’s supported by a modern, cloud-native, API-driven core. With the right architecture, data can move in real time, systems can talk to each other, and decisions can be made in the moment – not weeks later – giving banks the perfect platform to start to see tangible AI success.”
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