Banking on innovation: Engineering excellence in regulated financial services
Today’s financial services engineer has two needs. One is cutting-edge tech and frictionless access, and the other is robust security and risk management. Balancing both is tricky.
“We might be a highly regulated, centuries-old bank, but when engineers join us, their expectations are cutting-edge tech and fast access to data, with a self-serve process,” explains Hilary Lanham, Head of Engineering Excellence at Lloyds Banking Group. “In a highly-regulated environment, that’s difficult.”
As financial organizations progress their digital and AI programs, engineering leaders face more complex challenges than their peers in less-regulated industries.
This article takes a deeper dive into topics discussed in Stack Overflow’s Leaders of Code podcast series. Hilary Lanham, Head of Engineering Excellence, and Tom Kelk, Senior Product Owner, Productivity Intelligence, from Lloyds Banking Group, join Stack Overflow CEO Prashanth Chandrasekar and host Ben Popper to discuss the unique challenges facing tech and engineering teams in financial services.
Established banks often run on infrastructure built over decades. Mergers, acquisitions, and layered applications add complexity.
In Deloitte’s Future of Software Engineering in Banks report, 78% of engineers say working on legacy systems hurts morale, leading to staff loss and impacting business performance. But adding new software to legacy code can feel daunting.
Engineers who are accustomed to self-service must adapt to security reviews and compliance checks. The patience of engineers and management can wear thin. Talented technologists may leave for less restrictive environments so organizations face internal pressure to modernize fast.
Some institutions are taking action. According to McKinsey’s productivity study, banks that follow software firms’ cues have seen measurable impacts. The best performers can achieve 50% more capacity for innovation than average banks with the same budget.
Some have upgraded their workplaces to allure tech talent. Insurance brand Aviva’s Digital Garage brought together product, tech and digital teams in a creative-agency style space, far removed from the traditional city bank office.
Many financial institutions find innovation starts by simplifying existing tech. They must shore up today’s systems before adding AI or other new tools.
“The biggest challenge we’re facing at the moment is simplification,” explains Kelk. “How do we enhance the experience of one or two things as opposed to the experience of hundreds?”
Gartner’s research on financial services IT spending shows 58% of budgets in 2024 go to modernization and debt reduction, versus 31% for new capabilities. A McKinsey case study features a bank that increased team capacity by 30% through continuous improvement, without additional resources. As part of transformation, tech teams routinely analyze productivity data to find smarter ways of working and unlock major productivity gains.
As well as simplifying operations, Lloyds Banking Group focuses on standardization to ease the path to automation. They’re merging multiple GitHub organizations and around 80 artifact repositories into a single pipeline for automated governance.
“We’re going through a multi-year journey. The focus is on engineering excellence,” explains Lanham. “We need to get our engineers working more smoothly, reducing the friction and cognitive load.”A single knowledge platform helps engineers move between teams without relearning tools. “When an engineer wants to move from team A to team B, it won’t feel like joining a new organization. There’ll be familiarity, which will increase their productivity,” notes Lanham.
Beyond the technology, financial institutions face another persistent challenge: knowledge silos. Compliance and risk management requirements create expert clusters dotted across the organization.
“Before implementing Stack Overflow for Teams, we had 30-plus different platforms with thousands of users. 60% of people hadn’t spoken to anyone outside their team since joining. We needed to break down the barriers and enhance the knowledge within the organization.” —Tom Kelk, Senior Product Owner, Productivity Intelligence, Lloyds Banking Group
Information silos lead to misaligned goals and duplicated work. For Lloyds Banking Group, a centralized knowledge platform created unexpected benefits. “We can give product owners an unfiltered view of what people are searching for about their product and what questions are being asked to create a rich persona,” notes Kelk.
Teams can identify pain points quickly rather than waiting for formal feedback cycles. Instead of relying on the most senior stakeholders’ point of view, decisions can be based on product use patterns and frequently asked questions.
AI promises innovation and productivity gains for financial organizations, but their risk appetite is lower than many other industries.
“Every day, a new LLM comes out that beats the previous one,” says Kelk. “How do you design around what you provide to your engineers when our priority has to be how we protect our customers?”
Banks need to build a solid foundation for security while matching evolving customer expectations like personalization and ease of use, Kelk explains.
According to McKinsey’s research, the top tech trend under consideration for financial organizations is cloud and edge computing (84%), with applied AI at 78%. AI adoption is still in the early days; in 2024, 70% of teams were still at the pilot stage. McKinsey advises building strong security, governance, and data privacy practices before stricter regulations like the EU AI Act take effect, which impact organizations with users in the EU.
AI also raises questions about skills, training, and the value of experience versus AI output. “There’s going to be an interesting point where you have to decipher between real skills and knowledge, what’s learned experience, and what’s AI. We need to make sure that it’s targeted in the right way. Valuing real skills is paramount,” reflects Kelk.
While financial services regulations aren’t likely to get simpler, banks are finding ways to innovate without compromising security.
“We’re seeing a culture change with our security office and regulators,” explains Lanham. “As cloud tech, AI, and LLMs arrive, our engineers and security colleagues have to upskill.”
Gartner’s 2025 predictions say GenAI is shifting data security to protect unstructured data. Rather than cybersecurity taking a gatekeeper role, security by design is built into development processes.
“Instead of saying “no”, the culture is, how can we be more confident in saying “yes”?” notes Lanham. “We’re seeing a big change in our security posture, while keeping our customers’ safety at the forefront.”
As financial organizations carefully tread a path through digital and AI transformation, the most successful will balance innovation with compliance, speed with security, and standardization with flexibility.
Engineering excellence in financial services needs leaders who can set a clear vision while balancing tech potential with regulations.
The path won’t be simple, but by investing in simplification, standardization and a shared knowledge and security culture, financial services engineering teams can drive positive change for millions of banking customers.
