Special Scotland Fintech Festival 2023 – Nicola Anderson, CEO at FinTech Scotland
Season 3, episode 10
Listen to the full episode here.
Scotland Fintech Festival took place between the 21st of September and the 12th of October. With over 50 events the festival was a real success this time again.
During the launch event, the Fintech Summit, we recorded special episodes in collaboration with collaboration platform Findr.
In this episode we speak with Nicola Anderson, CEO at Fintech Scotland about the festival itself as well as initiatives that are underway, delivering the recommendations of the UK Research & Innovation Roadmap.
Navigating the Future: The UK’s Competitive Edge in Fintech Regulation and Innovation
“The UK has a strong competitive advantage in areas like cybersecurity, privacy and, increasingly, artificial intelligence. A lot of work, however, remains to be done. This is not an automatic process by any means,” outlines Dr Devraj Basu, Senior Lecturer in Finance in the Accounting and Finance department at the Strathclyde Business School. Basu helped set up the RegTech Forum which brings together industry, academia and government to help understand the fast moving RegTech landscape and how Scotland and the UK can position themselves to become leading global players.
“While the UK has well established strengths, it needs to pull together all these very different areas by creating an ecosystem solution,” he continues. Basu feels that if the UK provides a proper regulatory framework in the context of technology it will provide a greater impetus in unlocking innovation. A stable regulatory framework is also needed to adapt to technological change to ensure it’s fit for consumers – AI being a prime example. But the UK needs to simultaneously join up with international best practice as well. “These elements require a deep understanding of all the issues, as well as an aspect of agility to bring together all the different stakeholders,” he says.
Regarding the appetite of UK regulators towards the development of overarching digital public infrastructures (such as the so-called India Stack’ built on Aadhaar, India’s digital ID system), Basu believes that the UK can learn from establishing digital identities, preferably through the creation of an overarching framework for privacy regulations. However, the parallels stop there. This is because the UK would, unlike India, have to tackle its legacy technology issues. Further, the UK’s Financial Conduct Authority (FCA) can only play a limited role in transforming legacy infrastructure because rather than dishing out prescriptive directions to industry, the FCA is a principles-based regulator which can only outline overarching maxims.
In terms of innovating financial regulation itself, Basu feels that the UK has done the right thing by introducing regulatory sandboxes. Moreover, he feels strongly that the FCA should start looking at the costs that regulations impose on businesses and how they can be minimised. This could be achieved by implementing a by design’ philosophy by providing either high-level roadmaps that minimise cost or interactive processes that lead to better regulation. “One way of being innovative is if the regulator could convince organisations that the adoption of new regulations would actually improve products or sales. One thing that’s come out of our RegTech Forum is this notion of the by design’ philosophy, which takes a proactive view on regulation, which in turn encourages innovation,” Basu explains. “Ideally a regulator should be a body that guides businesses through a process and helps them get better.”
New partnership to tackle financial fraud using synthetic data
In the ever-evolving landscape of financial fraud, Authorised Push Payment (APP) Fraud has become a prominent concern for both regulators and financial institutions. In 2022 alone, a staggering £485.2 million was lost to APP Fraud scams, accounting for a significant 40% of all financial fraud losses during that period. To combat this growing problem, the Financial Conduct Authority (FCA) and the City of London Corporation have teamed up with Smart Data Foundry to provide innovative solutions and support their mission to eradicate APP Fraud.
Smart Data Foundry’s aizle Synthetic Data Engine
At the heart of this collaboration lies Smart Data Foundry’s cutting-edge aizle® synthetic data engine. This powerful tool is being harnessed to create a synthetic dataset tailored specifically for APP Fraud. This dataset will be accessible through the FCA’s Permanent Digital Sandbox, providing a resource for innovators and stakeholders in the fight against APP Fraud.
Understanding APP Fraud
APP Fraud occurs when individuals are deceived into transferring money to fraudsters posing as legitimate entities or individuals. The consequences of falling victim to these scams are devastating, particularly for those who are financially vulnerable. It is a pervasive issue that requires comprehensive and innovative solutions to address effectively.
TechSprint Initiative and Continued Development
Recognising the urgency of the problem, the FCA and the Payment Systems Regulator (PSR) organised a TechSprint event in September 2022, focusing on combating APP Fraud. Smart Data Foundry played a pivotal role during this event by providing their APP Fraud synthetic dataset. Building on this momentum, Smart Data Foundry has continued to refine and expand their dataset to meet the evolving needs of the industry.
The Importance of Quality Data
Access to high-quality data is essential in the fight against financial fraud. It enables innovators to test ideas, develop proofs of concept, and refine models effectively. The APP Fraud synthetic dataset, provided by Smart Data Foundry, covers the entire lifecycle of APP Fraud, offering a representative and relevant resource for researchers and organisations striving to combat this growing threat.
Bryn Coulthard, Chief Product and Technology Officer at Smart Data Foundry, stated,
“We focus on creating high-utility synthetic data to enable innovation within the financial services industry. We are delighted to continue partnering with the FCA with our APP Fraud datasets to help play a part in tackling this growing problem and to help ignite and accelerate innovation in this space.”
Photo by Sora Shimazaki: https://www.pexels.com/photo/crop-cyber-spy-hacking-system-while-typing-on-laptop-5935794/
FinTech Scotland appoints senior leader to accelerate plans for the Financial Regulation Innovation Lab
FinTech Scotland has announced today the appointment of a new senior leader, Trish Quinn, who joins as Strategic Innovation Director. Trish will be leading the development of the Financial Regulation Innovation Lab (FRIL) which is due to launch later on this year.
The Financial Regulation Innovation Lab (FRIL) is one of the recommendations laid out in the UK Fintech research & Innovation Roadmap published in March 2022. It is set to be a new collaborative centre of excellence for cutting-edge fintech developments in financial regulation. The Lab will explore solutions that aim to streamline regulatory processes, enhance compliance measures, and drive efficiencies across the financial sector.
FinTech Scotland, in partnership with industry partners, and with the University of Strathclyde and the University of Glasgow, will stand up the launch the Lab and drive progress this year. This industry-led initiative showcases the power of the Fintech Scotland Cluster to drive innovation. This project is funded by the Glasgow City Region Innovation Accelerator programme, led by Innovate UK on behalf of UK Research and Innovation. This financial support from the UK Government continues to endorse the opportunity from the emerging fintech sector to support growth across the UK economy.
As the newly appointed Innovation Director, Quinn will be responsible for leading the Lab and working with partners across Scotland and in the UK, in delivering a programme that will enable efficiencies through technology to meet the needs of current and future financial regulation. Quinn brings a wealth of experience in digital transformation and digital product development to her new role, having previously served in a number of senior digital roles in both the UK and Scottish Government.
Commenting on her appointment, Trish Quinn said:
“I am delighted to join FinTech Scotland as the Innovation Director and lead the Financial Regulation Innovation Lab. The potential to reshape the financial industry through technology applied to financial regulation is significant, and I am excited to join the team at FinTech Scotland to drive innovation, foster collaboration, and contribute to the growth of the fintech sector.”
Nicola Anderson, CEO of FinTech Scotland, said:
“Trish brings extensive experience in digital transformation, leading strategic initiatives across her career with an emphasis on change through collaboration and partnerships. Her leadership and experience will help us accelerate the Lab’s development, creating the conditions needed for more fintech growth in Glasgow and the FinTech Scotland cluster.
David Hillier, Associate Principal and Executive Dean of the University of Strathclyde Business School said:
“We are excited to welcome Trish to lead this critical initiative. The University of Strathclyde has significant expertise to bring, and we’re looking forward to driving this initiative, working closely with our industry partners across the FinTech Scotland Cluster and our academic partners in the University of Glasgow to drive this opportunity for Glasgow City Region. The Lab creates the environment for high-potential innovation in a subject that’s fundamental to the success of our financial system”.
Eleanor Shaw, Head of the University of Glasgow Adam Smith Business School said:
“Trish will lead a ground-breaking initiative that’s a first for Scotland and the UK, and we are delighted to be working with her. It’s fantastic to see Glasgow City Region’s innovation capabilities and ambition come together to create what will become a key asset for Scotland and the UK in driving innovation in financial regulation. The University of Glasgow is looking forward to playing a leading role.”
Dr. Catherine Martin, Vice Principal Corporate Services, University of Edinburgh said:
“I’m very pleased to welcome Trish to FinTech Scotland and want to congratulate her on this appointment. The Financial Regulation Innovation Lab is an exciting new endeavour and we at Edinburgh are pleased to support this opportunity for Glasgow and for Scotland. As a founding member of FinTech Scotland it’s a pleasure to see the fintech opportunity continue to grow across Scotland and the UK”.
Fintechs and DORA, everything you need to know!
Season 3, episode 7
Listen to the full episode here.
On November 10th, 2022, the Digital Operational Resilience Act (DORA) was approved by the EU.
It is designed to standardise IT risk requirements in the financial sector to ensure that all participants of the financial system are subject to a common set of.
Amongst other things it introduces an oversight framework for critical third-party providers.
In this podcast we will discuss how this new EU regulation can impact fintech firms that are very often providing 3rd party services to established financial firms.
Guests:
Yvonne Dunn, Partner at Pinsent Masons
Wayne Scott, Regulatory Compliance Solutions Lead at NCC
Jamie Graves, technical advisor on the TrueDeploy project
FinTech Scotland secures UK Government funding to Accelerate Innovation in Financial Regulation
FinTech Scotland has secured UK Government funding to accelerate innovation in Scotland’s fintech cluster. The funding will advance research and innovation in financial regulation.
The FinTech Scotland initiative in partnership with industry partners, and with Strathclyde and Glasgow universities includes the creation of a new collaborative centre of excellence, called The Financial Regulation Innovation Lab.
The ground-breaking collaborative Lab will focus on leveraging new technologies to accelerate efficiencies, revolutionise risk management and shape future regulatory developments, accelerating the UK’s ability to seize competitive advantage in the future of financial regulation and fintech innovation.
The new funding is part of a broader successful bid by Glasgow City Region included in the UK Government’s initiative to accelerate the growth of high-potential innovation clusters’ in Glasgow, Greater Manchester, and the West Midlands. All of the projects in the Innovation Accelerator Programme will commence in the Spring, following Innovate UK’s normal diligence.
The funding allocation to fintech in Glasgow demonstrates the national commitment to drive fintech innovation across the UK.
The Lab enables FinTech Scotland to deliver one of the strategic recommendations laid out in the FinTech Research & Innovation Roadmap, launched in March 2022 and aligns with the recently announced UK innovation initiative, the CFIT, formed in response to the HM Treasury FinTech Sector Review.
FinTech Scotland will work across industry leading the development of the Lab, with initial actions focused on
- A sandbox to test and advance fintech innovations that meet industry demand.
- A facility to develop new businesses with an accelerated path to commercial success.
- Industry driven academic research, advancing new deployment of tech in finance.
- A technology focused skills programme for risk and regulatory professionals.
- Researched, data driven contributions helping advance financial regulation policy.
Nicola Anderson, CEO at FinTech Scotland commented:
“I am delighted to see the commitment and recognition from the UK Government in the high-growth potential of fintech innovation in Glasgow. The Innovation Accelerator funding will help push this forward.
The Financial Regulation Innovation Lab is a ground-breaking initiative. It brings together, industry partners, fintech entrepreneurs, universities, and regulators to revolutionise the future of financial regulation and risk management through technology and data. The outcomes will shape jobs for the future and propel our fintech ambition, here in Scotland and across the UK. “
Charlotte Crosswell OBE, Chair at the Centre for Finance, Innovation and Technology (CFIT) commented:
“The development of the Financial Regulation Innovation Lab is an exciting opportunity both for Glasgow and for the UK.
We have significant potential across the UK to drive fintech innovation and realise our full fintech potential. Drawing on our regional strengths and bringing experts across the finance and technology ecosystem is key. This is our mission at CFIT, and we’re delighted to support FinTech Scotland as it continues to demonstrate its impact, identifying opportunities for fintech growth and working in collaboration to drive the Innovation Acceleration across the UK.”
Consumer Duty and fintech innovation
Season 3, episode 4
Listen to the full episode here.
In July 2022, the FCA published its Consumer Duty. Regulated firms need to implement the new rules by the end of July 2023 for open products and July 2024 for closed books of business.
Firms will need to review their products, communications and customer journey.
It will impact most areas in those organisations such as governance, reporting, product design, pricing, distribution, servicing and staff training.
In this podcast we will review the key principles, ask ourselves what the impact on both established firms and fintechs is as well as exploring innovative technologies that can help adhere to those new rules.
Guests:
Venetia Jackson – Senior Associate at Pinsent Masons
Joseph Twigg – Founder and CEO at Aveni
Chris Ansara – Founder and CEO at docStribute
Important changes for fintechs as R&D tax relief regime changes
Blog written by Saifur Rahman, Senior Technical Consultant at Leyton.
The UK’s Research and Development (R&D) tax relief regime is undergoing significant changes starting April 1, 2023. These changes include the amount of relief that can be claimed, the types of activities that qualify, and how businesses can claim relief. The changes aim to keep the UK competitive in cutting-edge research, ensure that the reliefs are effective, and use taxpayer money efficiently.
R&D Expenditure Categories: The R&D expenditure categories will be extended to include the costs of datasets and cloud computing. This is particularly relevant for the growing fintech sector, as the use of big data and cloud computing is essential for the development of new financial technologies, processes and workflows. Whether you are running a trading platform ingesting financial data from the likes of Bloomberg or developing large scale data algorithms to understand market conformity ”“ the use of cloud computing and pure datasets will be vital in the R&D project and thus have the ability to account for eligible R&D tax expenses. However, it should be noted that such costs cannot be included in R&D claims on an all-embracing basis ”“ for example, where such costs relate directly to R&D activities, they can be included, but not where they relate to a “qualifying indirect activity” (e.g. where you are including a small proportion of non-technical personnel time attributable to qualifying R&D projects). Additionally, exemptions state that the costs of the data and usage cannot be utilised beyond the R&D project or sold on for commercial purposes.
Pure Mathematics: R&D in pure mathematics will also qualify for relief and can form part of the qualifying R&D activities of the claimants from accounting periods beginning on or after 1 April 2023. This is relevant for fintech companies that use mathematical models and algorithm development in their R&D activities. However, the term “pure mathematics” is not yet defined in legislation, further guidance will be provided on this.
Refocusing Relief to UK Activities: One of the most fundamental changes in the Autumn 2021 Budget was to refocus the R&D reliefs provided to activities performed in the UK: for accounting periods beginning on or after 1 April 2023, subcontracted R&D work and the cost of externally provided workers (EPWs) will be limited to work undertaken in the UK. This may present challenges for fintech companies that outsource certain R&D activities to other countries. However, there will be specific exemptions where work outside the UK is permitted for geographical, environmental, social, or regulatory/legal requirements. Examples of such exemptions include deep ocean research and clinical trials, and, by inference, could include medical-tech trials in specific patient groups, international telecoms testing, or technology designed for extreme environments. HMRC will be providing further guidance on the exemptions before April 2023.
Overseas Branch: There is still some uncertainty for companies with overseas branches: currently there is nothing in the draft legislation relating to work carried out by staff of an overseas branch of a UK company ”“ so it is not clear if such costs will qualify for R&D relief in future.
Conclusion: In summary, the changes to the UK’s R&D tax relief regime will have a significant impact on the fintech sector, particularly in terms of the costs that qualify for relief and the focus on UK-based activities. Fintech companies should review their R&D activities and expenses to ensure compliance with the new regulations. We recommend that fintech companies monitor the situation and seek professional advice to ensure they are able to claim the reliefs to which they are entitled.
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RegTech, why now is the time to start caring
Season 1, episode 5
Listen to the full episode here.
Financial Regulation Innovation (RegTech) was highlighted in the FinTech Scotland Research and Innovation roadmap published in March 2022 as an essential area of focus for the financial sector.
Understanding and managing regulatory requirements costs financial institutions millions of pounds every year. As regulation evolves all the time to protect consumers, so do new tools and technologies. In recent years new solutions have emerged to help companies reduce cost, better understand requirements, and meet their reporting obligations. Open Banking, AI, Machine Learning and many more technologies have led to increased innovation.
In this podcast we will discuss what RegTech means, adoption within the financial sector and why now is the time for financial firms to consider and explore innovation around financial regulation. This podcast will also be an opportunity to promote the upcoming fintech table event during Scotland FinTech festival.
Guests:
Yvonne Dunn – Partner at Pinsent masons
Callum Murray – Founder and CEO at Amiqus
Financial Regulation ”“ the opportunity for FinTech Research & Innovation
The UK’s approach to financial regulation has been key in enabling a dynamic financial services sector that supports and drives the economy, enables a progressive economic outlook, creates jobs, and plays a significant role as a global financial service centre.
The development of this Roadmap highlighted financial regulation as a priority theme because of its fundamental role in FinTech and financial services, as well as the need for financial regulation to support the positive role FinTech innovation could play in the future of finance.
Regulation remains extremely complex for all those operating in the finance industry. Depending on the complexity of the financial institution’s business model, meeting compliance obligations can mean significant costs.
Industry research suggests that some of the largest global financial institutions are spending up to 5% of revenue on regulatory compliance. Across the UK this could mean the annual cost of demonstrating regulatory compliance is as much as £6.6 billion.
Throughout the development of the Roadmap, contributors highlighted their interest in the role technologies could play in future financial regulation. Some examples are AI, advanced analytics, high performance computing including quantum computing, and distributed ledger technologies.
Priority areas in Financial Regulation
The industry contributors to this roadmap offered a view that the future looks set for significantly more change. Our analysis highlighted three topics of interest:
Simplifying compliance
Helping financial institutions create new solutions and use FinTech to help meet current, continuously changing, and global regulatory obligations.
Future risk modelling and risk management
Reinventing risk management with technology and data analytics, and enabling new approaches to fight financial crime, address fraud and focus on emerging climate risks.
- Reinventing risk management with technology and data analytics
- Enabling new approaches to address fraud and fight financial crime
- Modelling for new and emerging climate risks
Future regulation design
Enabling an agile regulatory framework that works for all, and developing future regulatory oversight or supervisory technology.
- Regulatory reporting
- Interoperability and data standardisation
Roadmap next steps: Financial Regulation
A range of proposed next steps are laid out in the published Roadmap, which specifically identifies 13 actions relating to Financial Regulation, and categorises each into one of three phases over the next 10 years. These actions are illustrated in the graphic below. The report also references 23 different stakeholders who can support the implementation of these actions, which are broken down into research projects and innovation calls.
More information about FinTech Scotland’s Research & Innovation Roadmap can be found here, where the full Roadmap can also be downloaded.