Andy Brown discusses the ways in which new banks will alter the UK retail banking landscape through the introduction of financial technologies.

Already in 2010 the UK banking industry has seen a number of changes, including the rise of new players such as Tesco, Virgin and Metro Bank. These new entrants will need to work extremely hard to make a significant impact on the UK retail banking landscape, which has traditionally been the stronghold of a small number of key institutions.

However one way that the new kids on the block might manage to challenge the competition, if not leapfrog them altogether, is by using more sophisticated and agile technology. Implementing systems and processes with a technological 'clean slate' can give banking start-ups a significant advantage, if they can capitalise on it, because they can focus on the things that matter today, rather than working with products that solved the problems of the past.

Financial institutions today are learning the lessons from the more customer-focused retailers, and making it a priority to understand their customers better. By ensuring they have got a complete 'customer view', new banks will be better placed to track customer activity, prevent fraudulent transactions and encourage increased use of bank products.

This will also help the institution to win the confidence of disaffected customers, by being able to offer added-value and tailored services to customers to help deepen relationships. Players like Tesco have a highly developed understanding of these techniques and it will be interesting to see how they apply their existing customer knowledge to their retail banking offering.

The new banks that are launching into or entering the UK are likely to start off with relatively small operations, but it will be crucial to their future success that they build scalability into their processes to effectively future-proof their technology. For example, banks may initially choose to offer a limited selection of cards to their customers, but plan to extend this further down the line to include a wider offering and multi-application cards.

The other overriding characteristic I think we'll see in the IT infrastructures of these new banks will be agility, to ensure they are in the strongest position to quickly respond to changing market trends as new opportunities become apparent.

Another consideration will be the drive towards integrated systems that can handle payments from any channel, whether consumer or corporate, from start to finish - with no redundancy of technology, or duplication of processes and labour. This type of integration will enable financial institutions to manage transactions quickly and effectively, with less need for manual intervention and costly interfaces between different systems.

In this discussion, it is important to differentiate between those financial institutions that have chosen a strategy of organic growth, and those that have acquired smaller players to gain a foothold and the beginnings of a branch network in the UK. Banks that decide to take acquire other institutions must carefully consider whether they should utilise and adapt existing technologies, or if it would be more effective to start from scratch from an IT perspective.

To be honest, it is unlikely that we will see a drastic shakeup of the main players in the UK banking industry in the short term, at least as a result of these new entrants, but these smaller, more reactive organisations could certainly start to move the goalposts in terms of customer responsiveness and agility, and the big players will need to keep up.