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The world is moving fast. And so is fintech. £634 per second in fact. Is your London-based operation keeping pace? Scotland could revolutionise your business in a fledging fintech era.

Scotland's fintech sector

If technologist Scott Cook once proclaimed "we're still in the first minutes of the first day of the internet revolution", the same can be said for Scotland's thriving fintech sector. 

But forget minutes. We're talking seconds. 

In the UK alone, the sector turns over a jaw-dropping £634 per second

The sector in Scotland is equally powering ahead. Scotland’s fintech sector is encouraging startups and medium-sized technology innovators to set up alongside larger financial services players, either as competitors or partners. Traditional companies don't rest on their laurels.

Cook's view is echoed by Graham Hatton, financial and business services specialist at Scottish Development International (SDI). He said: "Some firms have been here for hundreds of years, and embraced technological change throughout their history."

SDI is a public agency that assists London-based fintech operations and those further afield to invest and thrive in Scotland.

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Fintech opportunities abound in Scotland

Proving Hatton’s point, Edinburgh-headquartered RBS, chartered as the Royal Bank of Scotland in 1727, recently joined 36 banks worldwide in testing Blockchain as a distributed platform for commercial paperless transactions, while Aberdeen Asset Management bases its leading technology expertise in Edinburgh. A relative newcomer, Tesco Bank, formed in 1997 in Edinburgh, now operates wholly online.

Hatton is optimistic about the impact foreign direct investment (FDI) can have on fintech. “Inward investors might start up with 20 employees for a particularly large firm, but we are seeing those quickly grow to over 100,” he said. 

For example, Swiss banking software specialist, Avaloq, located its first software development centre outside of Switzerland in Edinburgh. The company cited the graduate talent available, and the number of universities offering ‘excellent degrees in software engineering’ as reasons for its choice.

US-owned JP Morgan’s Glasgow Technology Centre in the city’s International Financial Services District (IFSD) employs more than 1,300 people, the majority in software development including apps for the iOS and Android mobile operating systems. It is one of only two JP Morgan strategic technology hubs in Europe. The IFSD also hosts US-based Morgan Stanley’s second largest European centre after London; its functions in its Glasgow offices include technology and data.

Why Morgan Stanley chose Scotland

Scotland already draws on fantastic fintech talent

Having so many large indigenous and financial services institutions in Scotland draws fintech professionals from far afield. And these include those in London who are putting down roots in vibrant communities with a high quality of life, education and connectivity. 

  • Edinburgh’s Nucleus Financial, established in 2006, provides a wrap software platform for financial advisers and their clients. Its 172 people look after nearly £10bn of assets across almost 80,000 clients, working with more than 400 adviser firms.
  • LendingCrowd, Edinburgh, is a peer-to-peer online lender matching investors to SMEs seeking loans. Since 2014, it has made more than 80 loans totalling more than £6.5m to UK companies and sole traders, and has 2,300-plus investors.
  • Australia’s Encompass Corporation arrived in Glasgow in 2015, assisted by £2.2m from state development agency Scottish Enterprise. It chose the UK as its first international base because the regulatory regime is similar to Australia’s and is using a further £1.8m from the Scottish Investment Bank (SIB) to source more data suppliers.

Encompass co-founder Roger Carson said: "Glasgow has a large, highly-skilled, stable and well-educated workforce. More than 30,000 work in financial services, and local universities produce high-quality computing science and software engineering graduates."

He added: “It has also enabled us to keep our costs relatively low, less than half of what it would have been in London. Encompass retains a small sales and marketing team in London to interface personally with the many potential clients in the capital. Encompass now has 35 staff in the UK, mainly in Scotland."

Scotland's universities are fueling the fintech talent pool

Fintech startups in Scotland often spin out of local universities under the leadership of graduates and/or entrepreneurs. ZoneFox’s software monitors employees’ computing activity across all devices to identify fraud or loss of sensitive material such as client lists. Assisted by £200,000 of proof-of-concept funding from Scottish Enterprise, the idea was developed by co-founder and CEO Dr Jamie Graves during PhD studies at Edinburgh Napier University. Napier is a centre of excellence for research and teaching about cyber security.

Other examples of Scottish universities responding to the sector’s needs include Glasgow Caledonian University. It is partnering with IT giant IBM and the IT and business process services firm CGI to offer work-based degree programmes. Abertay University, in Dundee, is the first university anywhere to offer an ethical hacking degree.

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Fintechs of all sizes are growing in Scotland

Other fintech startups in recent years in Scotland include: 

  • FreeAgent – cloud-based accounting software for freelancers, small businesses, and their accountants; 
  • The ID co –  a ‘digital passport’ for users to prove their real identity online 
  • Money Dashboard – a SIB-investee company providing free, online personal financial management 
  • Payfont – patented e-commerce identity and transaction security for online merchants
  • ShareIn – offering both a technology and a compliance service for clients including Hibernian Football Club to crowdfund directly from their own websites or to run their own crowdfunding platforms
  • Glasgow-based My1Login, has benefited from SIB investment and has grown since 2007 to become a European leader in providing secure identity and access management and single sign-on to all applications.

Graeme Hatton expects fintech to create dramatic new opportunities for financial services in Scotland. He said: “Cloud computing makes it easier for young companies to scale up, and crowdfunding provides an alternative source of finance, enabling smaller enterprises to see possibilities that did not exist before." 

"Digital banks are appearing – several now have licences in the UK, and will be trading soon. With Scotland’s strong tech eco-system and expertise in financial services there's no reason why the next digital bank couldn’t start in Scotland."

"Whether it's the success of the fintech companies here measured against criteria set by independent analysts such as EY, it is evident that Scotland, with its well established financial sector and strong technical talent, is a leading location of choice for fintech companies to thrive.”

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