UK Banks are leaving money on the table – here’s how to fix it

CapGemini’s 2026 World Payments Report has some home truths for UK banking. In the report, CapGemini criticise banks for “slow, manual and opaque” processes, “rigid offerings”, and “outdated systems”, noting that banks are, struggling to keep pace, constrained by legacy systems, margin compression, and rising fraud risks.”

As we’ve explained, British banks are facing what cricketers would call a sticky wicket: more competitors, rising costs, huge increases in online fraud risk and the ongoing spectre of updating legacy technologies. This year, it’s estimated that UK banks are investing over £800,000 on average just to upgrade their payment systems.

There are huge opportunities for UK banks in niche card markets, but slow, expensive legacy approaches are holding them back.

Banks not seizing opportunities

The paradox is that there are huge opportunities for card products in today’s market, especially in niche areas such as travel or currency cards, sole traders, or co-branded cards with sports clubs, universities and more. Despite this, most banks offer just three to five standard products, while fintechs steal a march by issuing new products every 4-6 weeks.

The problem banks face is that any new card implies changes to their core systems, which in turn means an 18-month development cycle and a £1 million budget. As a result, new products targeting smaller segments never make it to business case approval. However, axing these niche products is a mistake.

Don’t miss out: higher margins and cross-selling

As CapGemini’s report notes, the card business delivers higher margins and more predictable recurring revenues for banks compared to acquiring. As a popular payment instrument, cards also provide an opportunity for banks to cross-sell loans, insurance and wealth management, backed up by digital distribution and loyalty programmes.

However, the advantages of being a card issuer will erode as cards become part of a more diverse payments landscape that features digital wallets and alternative payment methods such as account-to-account (A2A). CapGemini predict cards will account for just 47% of all transactions by 2029, down from 69% today.

Modular is the answer

As interchange fee income declines owing to regulatory caps and the cost of maintaining legacy platform technologies balloons, banks need to iterate card propositions faster and at lower cost. Failure to do so means missing out on revenue streams and customer relationships which may not be around five years from now.

As well as speeding up the delivery of card products for niche segments and reducing costs to the point where niche products make sense, modular card platforms enable banks to white-label card products for their partners via API. At Tieto Banktech, we have created an API-first, modular card management solution delivered via SaaS which enables an issuer to define a new card product in minutes, compared to the more complex developer requirements of a legacy solution.

Using our modular card management solution, it’s possible for banks to launch new products in 4-12 weeks without incurring significant developer engagement with their core systems. This significantly reduces the cost of launching a new product, and means banks could test up to five niche products for the price of one traditional launch.

According to CapGemini, banks adopting a modular card platform approach are able to cut the time-to-market for new products by 80% on top of the cost reductions outlined earlier. This faster, cheaper and more effective approach to product iteration is of vital importance in today’s highly competitive and increasingly diverse payments industry.

This is how we fix it:

Cards as a Service: Full value chain

Card services and processing