"Financial services companies can be seriously undermined by underinvestment in the back office."
Just 2% of financial services companies are prioritising investment in back office technology, according to research from law firm Pinsent Masons.
The firm has warned that spending by on improving customer interfaces may be coming at the expense of investment in crucial back office IT systems, as 77% prioritise investment in enhancing customer experiences.
FCA research shows the number of IT failures at UK financial services companies has increased 138% over the last year alone to 600.
MPs have also been vocal in urging financial services companies to invest more in back office technology in order to better protect consumers following an inquiry by HM Treasury into IT failures in the financial services sector last month.
Pinsent Masons says investing in back office technology is vital in reducing the risk of operational incidents, such as systems failures and data breaches.
Alexis Roberts, head of financial services and partner at Pinsent Masons, said: “Financial services companies can be seriously undermined by underinvestment in the back office.
“The race to capture market share through customer friendly technology is, understandably, very important but that shouldn’t be at the expense of essential architecture.
“Effectively harnessing the power of technology is key for M&A activity and organic growth amongst financial services companies. This is true across the entire financial services sector - not just fintech and insurtech.
“In crowded markets, financial services companies that fall behind in developing and using technology will find it difficult to keep up."