The European and U.K. secured lending industries continue to struggle with "process bottlenecks" often disguised as risk controls. Even with modern digital front-ends, the backend infrastructure remains highly fragmented:
The orchestration gap: Friction persists in coordinating third parties such as brokers, notaries, and land registries. This is exacerbated by cross-border complexities within the EU Single Market and localized hurdles, such as the slow U.K. conveyancing process.
Manual heavy lifting: There is still a high reliance on manual document collection and PDF uploads, rather than utilizing data pre-filling via U.K. Open Banking, EU Payment Service Directive (PSD2/PSD3), or payroll APIs.
Approval delays: Lenders are searching for a "silver bullet"—identifying the one journey step (identity, income, or valuation) that, if rebuilt with artificial intelligence, could significantly slash approval times.
Data fragmentation: Poorly organized collateral data results in overly conservative underwriting and lower advance rates.
Reporting burdens: A lack of standardized data products across loan types makes aligning with IFRS 9 and investor reporting slow and difficult.
The conversation at the board level has shifted: Is the lending book fit for an AI-enabled world? The challenge is identifying where AI can release capacity without weakening the strict governance required by the Financial Conduct Authority, the Prudential Regulation Authority, the European Central Bank and the European Banking Authority.
Seven trends shaping UK and European secured lending
1. Tighter capital and regulation. Across the region, the finalization of Basel 3.1 and the implementation of Capital Requirements Regulation 3 (CRR3) are forcing banks to scrutinize secured lending books in greater detail.
In the EU, CRR3 officially took effect Jan. 1, 2025. A significant structural change is the introduction of a 72.5% output floor, which limits the extent to which banks can reduce capital requirements using internal rating models. This allows smaller European banks using the standardized approach to offer more competitive interest rates on safe residential and commercial property loans. Meanwhile, the U.K. PRA expected firms to fully prepare for Basel 3.1, mandating a rebasing of Pillar 2 requirements by March 2026.
2. AI-powered underwriting. Lenders are moving beyond simple credit bureau scores toward AI-enabled underwriting, but they must now navigate diverging regulatory paths.
In the EU, the AI Act — which becomes fully applicable in August 2026 — classifies AI systems used to evaluate creditworthiness as "high-risk." This introduces strict compliance safeguards and transparency obligations. Conversely, the U.K. has taken a different path. The FCA has concluded that existing rules provide a sufficient framework and is not planning to introduce new, AI-specific regulations at present.
3. Growth of embedded and platform lending. Secured lending is moving to where the customer already is. The U.K. alone recorded a 38% increase in embedded lending API usage in 2024. Success depends on API-first platforms that can respect different legal frameworks, GDPR nuances and collateral regimes across various European jurisdictions.
4. Efficiency focus in mortgages. With interest rates still elevated, lenders are focused on making purchase and remortgage journeys efficient, not just cheaper. This includes the rapid adoption of e-closings and digital identity verification aligned to eIDAS in the EU and equivalent frameworks in the U.K.
5. Auto lenders balancing affordability and EV risk. Europe’s shift toward electric vehicles (EVs) brings new risk dynamics. Lenders face stricter affordability checks under the FCA’s Consumer Duty in the U.K. and equivalent rules in the EU. There is also growing attention to residual-value risk for EVs, driven by rapid technology cycles and local regulations like low-emission zones.
6. Expansion of SME credit. Small and medium-sized enterprises remain a priority for European policymakers and U.K. banks. Lenders are utilizing real-time cash-flow analysis through Open Banking to underwrite credit more confidently, allowing them to serve "thin-file" businesses without relying on outdated bureau scores.
7. Productizing the collateral lifecycle. Leading banks are beginning to treat the entire collateral lifecycle as a unified data product. Every asset has a single governed record with valuations, legal status and links to exposures. Integrations to HM Land Registry in the U.K. and European cadastral systems are being built as reusable APIs.
Recommendations
U.K. and European lenders should make targeted, high-impact moves:
Invest where the return is clear. Prioritize secured-lending domains with strong demand, such as B2B embedded lending platforms and data-driven mortgage origination.
Make AI safe and auditable. Establish model governance frameworks that account for regulatory fragmentation. Systems must adhere to the EU AI Act while satisfying the U.K. FCA Consumer Duty and PRA expectations.
Build data products for each asset class. Create reusable data products for mortgage, auto, and SME classes. These should provide real-time exposure data for IFRS 9, Basel 3.1/CRR3 capital provisioning and cross-border reporting.
Is your data product strategy ready for the AI era?
AI is only as smart as the data you feed it. Yet, many enterprises struggle with scattered, stale data or legacy estates that lack the context AI needs to make good decisions.
If you are a senior business or technology leader navigating data complexity, we invite you to join our complimentary data products discovery workshop with Thoughtworks experts.
Together, we’ll assess your current data landscape, identify the barriers slowing value delivery and co-create a high-level roadmap to modernize your data estate.
Our goal is to help you build the foundations for continuously delivering trusted data products, so you can shorten the journey from ingestion to insight.
Find out more and schedule your workshop here.