Lloyds Banking Group has launched a financial technology (fintech) sandbox where fintechs can design and test their applications in the bank’s IT environment.
The Innovation Sandbox, as it is known, will see the bank work with fintechs to improve the digital products and services it offers its customers.
A number of experiments have already been conducted on the sandbox, which allows different parts of the banking group to collaborate with fintechs.
Lloyds Banking Group chief technology officer Vic Weigler said the sandbox has improved the bank’s ability to experiment and learn with fintechs at pace. “We are working to maximise the value of the sandbox and increase the velocity of technology-led innovation in supporting our growth strategy,” he added.
The sandbox is an isolated testing environment that enables fintechs to run programmes or open files without affecting the Lloyds Bank application, system or platform they run on.
Banks are increasingly turning to fintechs to help them keep pace with changing demands from customers.
Lloyds’ own research, published a year ago, found that about half of the UK’s financial services companies plan to increase investment in fintech through acquisitions and partnerships over the next 12 months.
The findings of a survey of UK finance firms revealed that 46% of companies plan to increase spending in this area, compared with 32% in the same survey last year.
Two-thirds (66%) of those companies surveyed that plan to increase spending said the main driver is to develop new products and services.
“The digital economy is transforming customers’ expectations and the way businesses approach delivering financial services,” said Lloyds. “Fintechs have shifted the competitive landscape in the sector, offering opportunities for established players to innovate their products and services and revolutionise their operations.”
Fintech could be set to experience an increase in demand. The cost-of-living crisis could spur innovation in the fintech sector as consumers seek help to manage their finances.
The current financial struggles of people across the world could encourage the adoption of apps, just as the Covid-19 pandemic did, but for different reasons.
When Covid-19 hit the world in 2020, the need for people to avoid contact with others drove the adoption of digital banking. With high streets shut down for long periods, the take-up of financial technology exploded as people across all age groups turned to apps to manage their money.
Apps could also help people manage their finances during the current cost-of-living crisis, with financial management tools, personalised financial products and a range of credit options available.
The combination of older people taking up app-based financial services and younger, digital-savvy people struggling to make ends meet could drive further innovation in the fintech sector.
Banks need to be quick to address this demand and partnerships with fintechs are seen as the best way of doing this.