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It's here. It's now. As the UK's largest financial services hub after London, could Scotland could transform its fintech sector into a Champions League? Frost and Sullivan may have the answer.

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Fintech is thinking big in Scotland. Really big. Clustered around its banks and financial companies, Scotland has world-class academic centres of excellence, which provide expertise and resources in fintech, including open banking, cyber security and big data analytics.

And now, new growth organisation, Fintech Scotland, has ambitions for Scotland to become a top 10 fintech location in the world by 2020. Or, as its new CEO, Stephen Ingledew, prefers: "A fintech Champions League."

Fintech talent in Scotland is world-class

The success of any Champions League depends on world-class talent, which is why up to 15,000 fintech jobs are expected to be created by 2026, according to academics at the Strathclyde University's Centre for Financial Regulation.    

The UK recognises it has a huge opportunity to lead innovation in the global financial services sector. Economic activity in finance and insurance contributed £1126.9 billion or 8% of Gross Value Add to its economy in 2014.

However, sheer size and global influence are not enough: Many traditional sources of profit are under threat from shrinking margins and from new digital entrants with lower overheads. Core activities in retail banking and insurance are being transformed by mobile payments, online-only banks and crowd-sourced investment and credit.

To turn these threats into advantages, the sector is working to boost its capacity to absorb new technologies. Scotland is opening up to collaboration with external innovators as never before.

Frost & Sullivan discuss why Scotland is a massive draw for over 1000 tech companies
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Here's why Scotland will make your London fintech want to expand from here

  • You’ll access a fintech cluster with world-leading companies based in Scotland - Morgan Stanley, Virgin Money, Tesco Bank, RBS and JP Morgan
  • Your business will benefit from a dynamic fintech community due to its close connections between companies, academia and investors
  • You’ll be part of a dynamic, innovative fintech centre which promotes partnership between industry and academia to promote innovation and develop capabilities. For example, Edinburgh Napier University collaborates closely with the financial services sector on security, launching its Cyber Academy last year
  • You can access CodeClan, Scotland’s first digital skills academy. It will provide your business with training opportunities across many technology sectors, including fintech via a 16-week accredited course

Discover more about fintech in Scotland 

London fintech firms can partner with universities that are a source of start-ups. ZoneFox is an innovative cyber security firm that spun out of Napier University’s School of Computing. The company’s software monitors and records activity to detect potential insider security breaches in real time. It received £650,000 from investors, including funds from the Scottish Investment Bank (SIB), the investment arm of Scottish Enterprise. Also, Edinburgh University provides essential technology skills training and qualification through its School of Informatics, the largest in Europe.

Why Scotland for fintech?

A wealth of skills in big data and artificial intelligence

Machine learning and big data analytics are key to recognising threats and fraudulent activity. Security systems must learn and self-optimise over time to counter the more sophisticated attacks by hackers. Scotland is well-positioned, with a strong source of data scientists to counteract the global shortage of talent in this field.

Financial services is recognised as the most advanced sector in its ability to detect and prevent cyber-attacks (Verizon’s annual review of security incidents. Data Breach Investigations Report 2015).

However, while the leading institutions have deployed the most sophisticated security tools available, the consequences of occasional breaches are extremely high – especially regarding potential fines for non-compliance with regulation.

Targeting customers with Compliance as a Service is a fertile area for start ups. Currently, the direction of regulation suggests that outsourcing suppliers will increasingly need to take part in their customers’ data audits and reporting processes.

Fintech-enabled disruption in Scotland

New challengers in financial services are opening up many opportunities which include:

  • branchless banking;
  • crowd-sourced business lending
  • mobile and wearable payment devices;
  • digital identity verification and biometrics;
  • crypto-currency;
  • personal privacy/data protection; and
  • mobile point-of-sale hardware.

Blockchain is a major disruptor

Scotland’s concentration of financial institutions, combined with its academic excellence and start-up environment, present an ideal eco-system for fintech innovation. One fintech area it is helping to pioneer is Blockchain. 

Originally devised by Bitcoin cryptocurrency founders, Blockchain is a trusted distributed ledger of transactions that operates without the need for centralised oversight. In London, asset managers are seeing Bitcoin make positive disruption in the way the fund industry operates, and are witnessing significant changes to business models. Scotland is an attractive market for firms seeking to supply the financial services sector. For example, Scotland’s high concentration of Asset Management firms is likely to be of interest to Blockchain experts.

This is where London banks with an interest in fintech innovators can follow those in Scotland: In 2016, Royal Bank of Scotland (RBS) joined 36 banks worldwide by testing Blockchain as a platform for commercial paper transactions. Since then, it continues its forays into Blockchain implementation, proposing a joint scheme originally with Deloitte and three Irish banks, Ulster Bank, AIB and Permanent TSB. This is to “explore new blockchain technology to improve the speed, resilience and security of the domestic payment systems.”

Want to join the Fintech Champions League in Scotland? 

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