By Kent Mackenzie, Director, Risk Advisory at Deloitte
Innovation has been part of the fabric of Scotland’s financial services scene throughout its long and rich history. With customer expectations changing, possibly more in the last decade than ever before, it’s just as well.
It’s clear that consumers of financial products are showing increasing willingness to experiment with different providers and products. That, in turn, is creating ideal conditions for some of the new technology-focussed businesses in FS to challenge traditional banking models.
It is, perhaps, no surprise then that Edinburgh, in particular, has seen a swathe of financial technology (Fintech) companies set up – evolving out of hubs, such as CodeBase, across the city.
One of the most exciting things about Fintech is that it’s changing and evolving all the time, with new and disruptive technology becoming mainstream. It is also starting to add value by changing and improving traditional business processes.
For example, Fintech start-ups are developing products that aim to give consumers more financial confidence and guidance – helping them to better understand how they spend and save money. In some cases, this could mean incorporating external big data or crowd-sourcing advice from peer networks to create benchmarks and share experiences.
Another trend coming out of the sector is the use of gamification techniques – for example, apps that can help consumers, or “players”, plan their savings and simulate how different products might work for them; all in an incredibly engaging way, like we’re used to in the world of gaming. Imagine using a savings account in the same way you do Pokemon Go.
From a business perspective, the use of cognitive analytics and artificial intelligence (AI) - for example, to better analyse new tax regulations or new accounting standards - is starting to emerge to help organisations make better decisions.
Within the Fintech sector itself, we're seeing the continued emergence of new Fintech hubs and open collaboration between different centres, with the recently announced Global Fintech Hubs Federation. This will help bring together the international community of financial technology players, which is an exciting development and could help Scotland emerge as an international player.
In Scotland, we’re working with Scottish Enterprise and Scottish Financial Enterprise to help grow Fintech in Scotland. We have all the ingredients required to become a real hotspot for the sector – but there are several steps we need to take if that’s going to happen.
A big part of what we’re doing is setting out an action plan with four main parts. The first aspect, involves setting out a clear aim. We need to know what we’re trying to achieve, before we can outline how we’re getting there. So, we’re working together to look at exactly what we want to accomplish in Scotland.
The next piece of the puzzle is skills. We have a great deal of talent in Scotland, which sets us apart from a lot of other potential Fintech hubs – but we need to make more of it. Our universities are among the best in the world and our financial institutions have all the expertise we require: we’ll be looking at how we can bring these two closer together with our indigenous Fintech firms to pool knowledge, capabilities and see how we can learn from one another.
We’ve reviewed how we market Scotland as a place to do business and work. Some other hotspots, like Copenhagen, are very good at telling the world about what they do. But, in traditionally Scottish fashion, we’re not brilliant at that. To remedy this situation, we’ll be looking at how we market Scotland as a place for Fintech firms and talent to base themselves.
Finally, we need a physical space in which all of these things can come together – like Level 39, Europe’s largest technology incubator, in London. That will be crucial in inspiring the next generation to take up the opportunities that Fintech offers.
We have a huge opportunity…
In 10 years’ time Financial Services will look radically different. We have such a huge opportunity to play a role helping our clients’ address the disruption the industry is facing, and develop new technologies and solutions from the knowledge base we have at our disposal.
We have an important responsibility and role to play across the wider industry helping guide and nurture new talent, and support UK-wide initiatives.
We are beginning to weave a fine Fintech tartan - yes there is a challenge (like anywhere) with encouraging and enabling the range of demographic, yes we all need to connect better, yes there are a few things to do to really set up a sustainable talent pipeline - BUT – it’s all there. What we now need is focus, leadership, connection, and commitment from each group in the eco-system to really drive Scotland on to the Fintech map.
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