The Rise of Scottish Fintech

  • Sharon Hamilton, Director of Financial and Business Services at Scottish Enterprise

  • 11.11.2015 12:00 am
  • Fintech

These days the term ‘Fintech’ rolls off the tongue of anyone involved in financial services. It’s not hard to see why when you consider the extent to which technology has revolutionised the whole financial services sector, enabling businesses to develop more agile operating models, bring products to market faster and significantly enhance the customer experience.

The UK and Ireland have been in the vanguard of these developments. In fact, with a market currently estimated to be worth £20bn in annual revenue and growing, the region is the fastest-growing for Fintech investment globally, according to a report published this year by the UK government chief scientific officer. 

Inevitably, however, many observers immediately think of London when they think of Fintech. And in the wake of the success of the recent Fintech Week London expo and conference and the ongoing focus on the scale of investment in the City, it is easy to forget that the UK’s Fintech sector extends beyond the capital.

Today, however, with a growing number of financial services companies investing in technology and a great talent pool to draw from, Scotland is well placed to capitalise on the potential of its Fintech sector. A highly-successful track record in financial services, renowned strengths in technology and innovation, a skilled workforce and good communication links are all enabling us to punch above our weight and remain the top location for inward investment outside London.

In fact, according to a survey by EY, 2014 was a record year for foreign investment into Scotland with scientific research and financial services well represented among the 80 new projects secured. Indeed, the financial services sector saw investment pick up in 2014.  According to the report, the five foreign direct investment (FDI) projects documented from the sector represented the highest level Scotland has secured from that industry since 2006.

But to build on this success Scotland needs to differentiate itself from what London is able to offer.  One example of this is Glasgow’s recent investment in becoming a smart city and technology hub. Part of the £24 million Future Cities grant awarded to Glasgow is being spent on pilot studies in how everyday objects can talk to one another through a central data hub so the authorities can ease congestion and support energy efficiency.

The connections to Fintech may not be instantly evident. However, big data analytics is currently one of the major drivers of the Fintech industry, helping financial services companies to attain greater insight into their customers’ behaviour and key market trends than ever before.

Yet despite the talk about big data, a gap remains between demand for the technology and the ability to derive business value from it. The major issue is a shortage of elite data scientists – those rare individuals who combine business skills with technical expertise.

This is where Scotland’s talent pool really comes into play. Companies investing here have access to a well-educated and skilled workforce, with an impressive ratio of graduates per capita to select from. Initiatives such as Future Cities Glasgow and the Data Lab, a collaboration between industry, the public sector and world-class university researchers in Glasgow, Edinburgh and Aberdeen will help develop these new data science capabilities and attract pioneering new businesses. Already, clusters are growing around these hubs.

One such company attracted to Glasgow for these reasons is Encompass Corporation which provides visual information management technology to the insolvency and restructuring sector. In fact, the pull has been strong enough to lure their senior management team from Sydney to invest over £2.24 million in opening a new office in the city’s financial district, creating 23 new jobs. The investment is being supported by Scottish Enterprise through a Regional Selective Assistance grant worth up to £357,000.

The new Encompass office is being managed by Alex Ford, who told us:  “We recognise Glasgow as a city focused on becoming a tech hub and smart city. We plan to use the grant to bring in highly-skilled staff from the rich local talent pool, take advantage of the city’s strong culture of cutting-edge research, while capitalizing on new commercial opportunities.”

Encompass joins a number of dynamic financial services companies we’re helping to grow, creating new jobs for Scotland.  The recent announcement by Avaloq of its intention to double its Edinburgh workforce is further evidence of the benefits Scotland can offer growing Fintech companies. Others such as CGI, Wipro, SAS and Cognizant have also increased their Scottish headcount recently.

Our thriving financial services sector, employing almost 85,000 people, is a ready market for incoming Fintech businesses. At Scottish Enterprise and our international arm, Scottish Development International, we are committed to growing the sector in Scotland.  We have a dedicated financial services team focussed on attracting both new investors to Scotland as well as supporting existing investors to expand. 

In addition, through our account management programme we work intensively with around 125 Scottish firms in the financial and business services sector, supporting their long term growth ambition in areas such as innovation, investment and internationalisation. 

We aim to promote Scotland as a cost-effective option by providing access to support mechanisms such as funding, premises identification, recruitment of staff and the establishment of supply chains and partner networks. 

These are all good reasons why Scotland is set to become a centre of excellence for Fintech, attracting fast-growing companies such as Encompass which will benefit from access to the best data science talent and research. Last year overall foreign investment rose by nearly 17% - and expectations are high for 2015.  Collaboration and partnerships are instrumental in this success and together we will ensure Scotland remains one of Europe’s leading financial centres and internationally recognised as one of the most important UK financial centre outside London and the South East.

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