What is fintech and does the answer really matter?

There’s no simple answer

At FinTech Scotland we meet lots of fintech companies, fintech professionals and fintech enthusiasts. What’s startling however is that none of them can agree on a definition of what fintech is.
It’s hard to define as fintech is an umbrella term that sits on top of many things. It is however interesting to understand what people refer to when speaking about it.
David Goodbrand from law firm Burness Paull explains: “Whilst innovative technology in the financial services industry is nothing new, the phrase Fintech is increasingly being used to describe the innovative technologies and businesses that are transforming or disrupting the way in which financial services are delivered.”
Depending on the context, Fintech can be used to describe the:
Technology ”“ the wide range of technological innovation in the financial services market including apps, blockchain, platforms, open banking and robo advice.
Businesses ”“ the businesses (start-ups and more established players) who are developing the innovative digital technologies, platforms and propositions.
Sector ”“ the banks, technology businesses and other stakeholders who are developing, implementing and using digital technology and propositions.

What’s a fintech company?

So let’s focus on the business side of things. Ray Bugg from Digit differentiates 2 types of fintech companies:
PureGen Fintech
These are organisations offering a financial service utilising technology. They embrace tech as part of their product offering.
MixedGen Fintech
These are the organisations providing technology solutions to the FS sector.

And so what?

Defining fintech is only interesting if it helps include and not exclude. This is why at FinTech Scotland we speak about the fintech eco-system. Universities, established FS brands, new start-ups, technology and service providers are all part of this community, helping innovation and disruption in financial services.
It doesn’t really matter to us whether your company or organisation qualifies as fintech, we’re interested in bringing together all those who want to form part of the fintech revolution.

David Ferguson – 1 year as a fintech envoy for Scotland

David Ferguson, CEO at Nucleus, the independent WRAP platform, shares his thoughts after a busy year growing his business and representing Scotland internationally as a fintech envoy.

The government is keen to ensure UK fintech doesn’t become too London-centric and has now built a network of regional fintech envoys to help deliver that ambition. When the Treasury first asked if I might be interested in one of the positions, Graeme Jones of Scottish Financial Enterprise had already started exploring what could be achieved here, but there was still much to be done.

When I was first asked to get involved I initially questioned how much time it would consume and how it might conflict with or distract me from my full-time role at Nucleus. I discussed it with our chairman and other members of the Nucleus board and concluded it should be positive in terms of helping to position Nucleus and also in the personal learning and development opportunities for me.

Graeme’s energy and connections have been the driving force behind the creation of Fintech Scotland and I guess I’m trying to help the new organisation find the right balance between serving the needs of start-up and early stage fintechs and our established institutions. Having worked in one company for 11 years (and trying to get it off the ground for nine years before that), I’ve found it pretty tricky to to get my head around all the different players and their various roles in making Scotland a success as a fintech destination. Against that, I’ve found it hugely inspiring to listen and learn from others, whether they work for established businesses or they find themselves in the same position Nucleus was 10 or so years ago.

Progress to date has been through a steering board made up of a group of around 30 volunteers, but we are now close to formalising the entity with a more conventional board structure in the next month or so. Initially because it was a group of volunteers everyone was keen to take the project forward, and there can almost be too many ideas. What’s important now is a clear sense of focus, and the board and the chief executive will be pivotal in making this happen. There is a business plan in place, though that may be revisited once the CEO is in place as it will be their’s to drive.

What we have with fintech is an industry characterised by very small start-ups and large institutions. There can be various incarnations of that and interactions between the different groups, with start-ups being bought by the institutions, selling their products to or through institutions, mergers, or institutions taking stakes in other firms. This is about creating a culture and a system that together with universities and the public sector, starts to answer the question of how do we, in the round, make this a great place to do fintech. We already have world class universities, and a particular high spot with the University of Edinburgh’s School of Informatics. The next stage is to cultivate an ecosystem where people who are good at this stuff can go for help, access resources and ultimately collaborate for success.

If I end up better at my job as a result of this then ultimately that it is good for Nucleus. If Fintech Scotland becomes a success, then Nucleus will benefit from that as we should find it easier to attract talent. My fintech envoy role doesn’t directly align with benefits to Nucleus, but I’m hoping there could be lots of interesting spin-offs, which would be cool.

Open banking: Catalyst for collaboration and partnership

This article has been written by Manuel Peleteiro, founder and CEO at Inbest.ai, a Scottish fintech.

Open Banking – the challenge

Opening Banking was a popular theme at the annual Scottish Fintech conference and it was analysed from numerous angles e.g. likely changes in the market landscape that might be triggered by Open Banking, how banks are losing the control over the purchasing process of financial products, and PS2D regulation.

During the conference, Phill Gillespie from Money Dashboard and I had the opportunity to host a workshop about Open Banking and the API ecosystem in the FS industry.

The underlying challenge we face in the FS industry is plain and simple”¦for most people FINANCES ARE BORING! But it is also true that without financial products we would not be able to protect ourselves and our families, we would not be able to sustain our lifestyle or achieve our personal goals. We do not think how cool buying a insurance is and we certainly do not brag with our friends about our pension plan, but we need these products because we want to travel safely and enjoy our retirement.

The power to re-organise the industry

At Inbest.ai, we think that Open Banking will allow companies to place FS products and services where they belong, co-piloting our lives and checking that we are taking the right decisions to protect our families, maintain our lifestyles or make our hard-earned salaries go further.

FS companies must be humble and flexible to seamlessly embed their propositions into the products and services we use throughout our lives i.e. banking should be a mean to improve our lives, not a goal on its own. To deliver this strategy, FS companies should understand intimately customers’ needs and behaviours as well as collaborate with companies in other industries to distribute their products and services. If FS companies keep working in isolation, non-financial players with large Balance Sheets will be more than happy to fill this market gap, as Bill Gates famously stated, “Banking is necessary, banks are not”.

Another alternative will be reducing their front-line exposure and focusing on a core part of the banking stack e.g. trading, foreign exchange, settlement. To succeed in this strategy, these specialised banking services should be easy to consume by companies that are downstream in the value chain.

All in all, regardless of the strategic route, partnering and collaborating should be a core foundation on the way modern FS providers operate, and APIs are the technological framework that makes this possible. FS providers should embrace the use of APIs across their different teams and divisions as well as with their suppliers and customers.

Want to find out more?

Inbest.ai is on a mission to automate, simplify and personalise long-term financial planning to make financial advice & guidance accessible and affordable. APIs are the backbone of our company and we use them not only to build, market and sell our Financial Planning platform but also to manage our business.

FCA Innovate to visit Scottish fintechs

FCA Innovate will be visiting Glasgow on 24 October and Edinburgh on 3 November as part of their commitment to spend more time in Scotland to ensure the Scottish FinTech ecosystem has the necessary access to FCA Innovate.
The FCA Innovate initiative was launched in 2014 to encourage innovation within the financial sector.
It provides a sandbox where new concepts can be tested, regulatory support and feedback.
As part of their visits they are offering innovative firms the chance to book a drop-in session to discuss specific regulatory questions they face, which could act as a precursor to more formal support from Innovate.
If you think you could benefit from one of these sessions, please contact innovationhub@fca.org.uk

Launch of AG Elevate 2018 for Scottish fintechs

For the first time Scottish FinTech firms are actively being targeted to join the programme. The law firm already deals with a large number of fintech companies including some Scottish ones such as FNZ, Money Dashboard and MiiCard.
They propose a 12-month programme with 2 variants, one for small start-ups (< £1 million of investment) and one for bigger start-ups (at least Series A’ funding of more than £1 million). Both tracks offer mentoring services and free legal advice as well as training and networking.
David Anderson, a partner in AG’s Scottish FinTech team mentioned FinTech Scotland as evidence of a vibrant fintech eco-system in Scotland and one of the reasons that leads the firm to target Scottish fintechs.
This initiative will be manned by AG’s most experienced FinTech lawyers. AG have been winning many awards in recent years for their focus on innovation.
Some of the fintechs AG is currently working with: Delio, Pace Invoice, Penta, Moneyfellows and Mespo.
Fintechs who want to register can do so by clicking here