Banks are set to invest in legacy systems as 30 per cent see challenger banks as their biggest threat in the year to come.

Eighty per cent of bankers believe challenger banks are an increased threat to their business, according to a survery commissioned by FinTech provider Fraedom.

Bankers expect their organisations to invest heavily in new technology in 2019, with 44 per cent suggesting that legacy systems will be updated.

Almost half of respondents perceived legacy systems to be the biggest barriers to the growth of their banks, while one third said it's the pressure to save money.

With investing in new technology high on the agenda for commercial banks, the survey found that over half (53 per cent) of respondents believed AI and machine learning would be the technologies to have the biggest impact on commercial banking in 2019.

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"With challenger banks setting themselves apart by offering innovative technology platforms, commercial banks are now realising they must invest in key areas in order to counter this threat.

“This was also echoed by our survey which found other disruptive influences in 2019 to be digitalisation (36 per cent) and consumerisation of technology (36 per cent)," said Kyle Ferguson, CEO of Fraedom.

"It is clear to see that challenger banks are a disruptive force within the sector. Through the use of innovative technology, these banks have plugged a gap left by established retail banks, and are acting as a stark warning to banks within the commercial space which remains open to similar disruption.

"If commercial banks are to compete, they must become more agile and adopt new technology platforms suited to changing needs of businesses, or risk being left behind."

Founded in 1999, Fraedomworks with banks to provide a spend management system. The company has offices in the UK, US, Canada, Australia and New Zealand and manages transactions for a total of 6.4 million employees.