Financial services face off against a host of novel challenges.

Growing regulatory complexity, shifting trade dynamics, and a digitisation frenzy make for a tricky business environment. As firms attempt to future-proof for a wholly uncertain future, transformation is the word of the hour.

Agile, compliant, tech-enabled business models will help firms capture market value, provided leaders can embrace (and adapt to) constant change.

Access to the right talent will be a key differentiator in the year ahead, but mastering the market is easier said than done. Broadgate’s change and transformation consultants explore the new face of UK financial services below.

Regulatory Change

New year, new regulation. While firms are familiar with change, 2025 looks set to take it up a notch, particularly in areas like Consumer Duty and digital resilience.

The compliance burden can be made an advantage, and the start of a new year presents a perfect time to take stock. Some of the most impactful regulatory updates include:

  1. PS16/24: Outsourcing and third-party risk management (FCA/PRA/BoE): The PS16/24 on outsourcing and third-party risk management came into force on January 1, 2025. While the Treasury has yet to designate any Critical Third Parties (CTPs), the regulation applies to critical services provided by third parties whose failure could significantly disrupt the stability of the UK financial system.
  2. Crypto Regulation (FCA): The FCA plans to consult on more comprehensive crypto regulation, with a recently released roadmap pointing towards a 2026 implementation date. You can find out more here.
  3. Consumer Duty (FCA): The FCA recently published their first board reviews since the Consumer Duty Act went live, spotlighting its focus on raising the standard of customer outcomes in finance. We’re likely to see more pressure on firms to promote (and evidence) greater financial inclusivity.
  4. DORA - Digital Operational Resilience Act (EU): While not directly applicable to the UK, firms that operate in the EU will likely be impacted. That said, previous regulations like the SS2/21 align neatly with DORA, so in-scope firms may already be in a strong position to retain compliance.
  5. PS5/24 Solvency exit plans for non-systemic banks and building societies (PRA): In-scope firms must be able to provide their solvency exit plans on request by October 1st, 2025. Firms will likely need to adjust their risk management frameworks, adding pressure to the governance process.
  6. Basel 3.1 Standards (BCBS): The PRA has delayed the implementation of the Basel 3.1 standards until January 2027, allowing ‘time for greater clarity to emerge about the United States’ plans.’
  7. EU: The AI Act – the first-of-its-kind act is already in force, and the first provisions will become mandatory on February 1st, 2025. While not directly applicable to the UK, it will likely impact supply chains and any firm operating in the EU. As AI steps up its presence (and capabilities) in financial services, we expect this regulation to play a prominent role in UK compliance.

 

The demand for tech-savvy compliance talent is high. From governance and culture to team structure and IT systems, regulators are leading with a transformation-focused agenda, and it’s forcing firms to adapt quickly and significantly.

It’s leading to some interesting changes on the workforce front – notably, we’re seeing compliance functions move beyond the back office into a more strategic decision-making position.

It’s a similar story in the risk space, with third-line risk-taking a more collaborative, data-driven approach to areas like liquidity, outsourcing, and technology.

AI Automation

Tech has become a top talking point as the AI maturity curve steepens, leaving laggards far behind the leaders (thanks to a compounding effect).

The integration of new technologies like RegTech and AI-enabled systems is fundamentally transforming finance. According to the Bank of England, 75% of firms are already using AI, and another 10% plan to implement it in the next three years.

Firms will need to act quickly to avoid being left behind, but hesitation is commonplace in UK financial services – when we speak to leaders in our network, we find that data protection fears, talent shortages, and a lack of enterprise-wide understanding are often mentioned as the main barriers to implementation.

Role replacement fears are still high, particularly given how vulnerable banking is when it comes to AI automation. A report from Citigroup found that over half (54%) of all banking jobs are at risk of displacement through AI.

That said, it would seem that replacing the workforce with machines isn’t at the top of the priority list for leaders.

At our recent leaders’ networking event in Zurich, we found that the general sentiment was that decision-makers were focusing on freeing up the workforce so they could use their brains more creatively, leveraging AI to automate repetitive tasks.

Moreover, there was unanimous agreement that leaders must provide people with the capacity to perform roles that will add value as the business scales. Again, it’s something automation can support.

This is something we’re seeing to varying degrees of success, most prominently in:

  • Actuarial (it’s very common to find AI implementation in the insurance sector)
  • Cybersecurity
  • AML (Anti-Money Laundering)
  • Legal
  • Risk and Compliance

It’s common to see role merging as hiring managers increasingly target candidates with a blend of technical acumen, regulatory knowledge, and financial services experience. This is often exacerbated by the push for more streamlined functions in the name of greater operational agility.

Digital Disruption

The Bank of England detailed its desired upgrades to the UK financial services payments system in a recent paper (you can find it here). One key theme was the strengthening of the UK’s position in the global financial system. Some of the critical technological upgrades mentioned include:

  • The development of programmable platforms, including those based on Distributed Ledger Technology (DLT). Blockchain is a type of DLT
  • Interbank payment systems used alongside cards, like the kind found in Brazil, India, and Sweden
  • Tokenisation
  • The exploration of a Central Bank Digital Currency (CBDC)
  • The BoE has been working with the FCA to set up a Digital Securities Sandbox, enabling the trade of digital currencies in a safe and regulated environment.

It’s worth noting that the UK is a major player in cloud-based financial services, and considering the immense growth projection in this space, firms will no doubt want to keep it that way – the global Banking as a Service (BaaS) space is forecast to grow to $85.73 billion by 2032.

While digital disruption likely represents the best opportunity for meaningful growth and sustainability, it’s also one of the largest existential threats for banks: Cybersecurity, regulation, competition from challengers (including big tech), and traditional banking models all present novel challenges in today’s environment.

Agility

Recent trends indicate a shift away from traditional consultancy arrangements towards smaller partners, and it’s easy to see why – they’re not only a more cost-sustainable alternative, but they’re also more agile.

Firms are looking to move quickly and cut spending on external consultants (Deutsche Bank by 75%)  creating an opportunity for smaller players to provide more specific and meaningful value in key areas, including digital transformation.

In most cases, opting for this alternative tends to result in better talent joining the project. Whether that’s down to more specialised expertise, a flatter organisational structure, more hands-on involvement, direct access to senior talent, a shorter supply chain, or stronger relationship building, the boutique approach is quickly becoming a favourite in this transitional period for financial services.

If you’d like to learn more about how the consultants at Broadgate can use precision, speed, and agility to help you navigate the talent market, contact our change and transformation recruitment division directly: [email protected].