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In The Banker November 2016 issue, Sharon Hamilton, our head of financial and business services, explains why global finance institutions are benefitting from Scotland's flourishing fintech scene

Scotland fintech sector

Fintech is driving a change of pace in the financial sector. It's presenting both opportunities and challenges for financial services firms. New challengers are encroaching on market sectors where traditional incumbents are hampered by overheads. 

Services such as branchless banking, crowd-sourced business lending and mobile and wearable payment devices are here. They've already changed the way that customers interact with their bank; emerging technologies will continue to drive change within the sector.

Customer expectations are influenced by the experience provided by other services. Apps such as Facebook, WhatsApp and Snapchat allow people to communicate with others instantly. Expectations around digital based services from banks are growing too, for example the ability to transfer money to others instantly. However, one of the biggest challenges being faced is the cultural change required to fully embrace the opportunities which fintech presents.

If you're a London-based fintech, contact Scottish Development International (SDI) to discover how we help fintechs move into Scotland.  

New technologies change is unprecedented

So what do we mean by cultural change and where has this idea come from? The speed at which new technologies are being developed and deployed is unprecedented. Airbnb is the world’s leading platform for rental accommodation but the company doesn’t actually own any property. Facebook, the world’s most popular media owner, creates no content and Uber doesn’t own any cars despite being the world’s largest taxi provider (and indeed the world’s most valuable start-up, now worth around $70bn.

Sharon Hamilton pic
Sharon Hamilton

We’re operating in a brave, new, digital world, and this has led to rapid change in many sectors, including banking and financial services. The majority of financial services firms have acknowledged that prospects for technology are bright in Scotland, causing a shift in the sector and they are reacting accordingly. 

Some companies have increased spending on technology and are investing more in developing their own systems, such as mobile apps. Many are investigating the potential application of innovative technologies such as blockchain.

However some traditional financial services firms are facing a huge cultural challenge in bridging the gap between their traditional service offerings and where they feel they need to get to. This is to satisfy customer demand for smarter, quicker services and to stay ahead of the game. Put simply, many companies are questioning whether their staff and structures will actually allow them to develop new disruptive solutions, or whether they are blocking the relevant innovation.

Dynamic, ambitious start-ups are leading the way

From the discussions we are having with companies and investors in Scotland, the feeling is that more often than not, traditional structures are not enabling change and the pace required. These companies are seeking an alternative solution; one which may lie at the opposite end of the eco-system, in the form of dynamic, ambitious start-ups. Alongside start-ups, Scotland is an ideal complementary location for London financial firms to extend their operations

We are operating in a brave, new, digital world. This has led to rapid change in many sectors, including banking and financial services.

Investment into the sector from a range of sources, including VCs and the corporate venture arms of financial institutions, has increased rapidly over recent years and new companies are emerging constantly. Many companies are investing directly into these new entrants, for example BBVA which bought a 29.5% stake in the new digital bank Atom, and some are running programmes for startups in order to find potential partners which could be integrated into their business. 

Opportunities are opening up for collaboration with external innovators as never before. Scotland has a well established financial services sector and is home to leading global companies, a growing community of fintech companies and a vibrant tech eco-system. Companies can access a large, talented, tech-savvy workforce with financial services experience, in a location where they’ll be part of an exciting, innovative tech environment. I believe that the availability of partners and talent provide the perfect environment for fintech collaborations to succeed in Scotland.

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Global fintech companies are investing in Scotland

NCR is one such company which has benefited. The US headquartered company set up part of its Digital Insights (DI) team in Edinburgh to complement the core hardware expertise it has in Dundee. Both sites are able to tap into the talented workforce in Scotland, in particular the graduates from Edinburgh’s universities. In 2010 NCR acquired Mobiqa. It was a global pioneer and market leader in the delivery of mobile optimised content and a provider of tickets, boarding passes, downloadable applications and coupons in the travel, entertainment and retail sectors.

NCR’s site in Edinburgh has since grown from a successful software start-up to an integral part of a global, multi-billion dollar organisation. The Edinburgh site is a key component within NCR’s DI group that develops a range of digital banking solutions to help financial institutions better serve their customers. The location allowed them to create and retain the culture of a start-up within a large organisation. Although collaboration with fintech companies is the strategy for some, there are many global companies which have long since embraced technological change.

Major global banks have fintech operations in Scotland

Technology projects are helping to shape innovative and comprehensive services for customers, and these are being led by internal technology teams. JP Morgan, Morgan Stanley, RBS, Tesco Bank and Avaloq are just a few of the many companies which have fintech operations in Scotland, in a large part down to the quality of the existing workforce and graduates from local universities.

Whether you are a financial services organisation, or a fintech company considering the next step in your expansion, Scotland presents many opportunities for growth and collaboration.

Scottish Development International (SDI) can connect you to the right people and the right partners and we are ready to help.

Contact our London office