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 In the report, CapGemini criticise banks for “slow, manual and opaque” processes, “rigid offerings”, and “outdated systems”, noting that banks are, struggling to keep pace, constrained by legacy systems, margin compression, and rising fraud risks.”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.

Faster, better, more

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.

This delivers set-up fees to banks on top of a fee for every card issued, plus transaction fees: in other words, three new revenue streams for relatively little outlay. What’s more, banks can layer additional services on top, such as real-time spending controls or instant virtual card issuance.

Modular is the answer

By using a modular architecture that separates card services from core banking via APIs, banks could launch new products in 4-12 weeks without touching core systems.

This reduces the cost of launching a new product from £1M to around £200K, and means banks could test up to five niche products for the price of one traditional launch. According to CapGemini, banks adopting composable platforms cut time-to-market by 80% - one US bank cut their launch time from 18 months to five months.

Modular platforms turn cards from slow-moving products into rapid-iteration revenue engines, and mean banks can serve the needs of niche segments rapidly, and at lower cost – as well as layering value-add services and new revenue streams on top. In tomorrow’s highly diverse payments environment, banks will need to iterate faster and diversify revenue streams. Modular card systems respond to these demands, while avoiding the time and cost of adapting legacy technologies to the new environment.

This is how we fix it:

Cards as a Service: Full value chain

Card services and processing