Fortnightly FinTech Fuse – getting started
Welcome to the first Fortnightly Fintech Fuse!
This will be my regular blog sharing some of the insights, learnings and engagement with people form the diverse range of fintech participants across Scotland and globally.
To Fuse’ means to bring together and blend two or more things. This is exactly what FinTech Scotland is seeking to do with the aim of driving growth and creating jobs, hence the name for this blog.
The fusion arising from the changing world of financial services and technology presents enormous opportunities and through this blog I hope to share how Scotland is advancing on these.
The blog will be a cross between an open diary and informal ramblings that hopefully highlight the progress being made in fusing together the skills, resources and capabilities that make the potential fintech growth and job opportunities come alive.
The style will be chatty and quick read. It is not intended to be a formal report nor exhaustive of everything happening in our dynamic and thriving Scottish fintech environment.
Hopefully it will be a catalyst to the many people directly engaged or looking to be involved in delivering the enormous benefits for all of fintech developments.
Engaging Response
The start of the new role in January can be best described as a whirlwind of activity, with the announcement sparking a very positive response from the diverse range of fintech participants. I’ve very much appreciated all the feedback and comments in these early days and the task has been to get out to see as many people as possible to hear thoughts and share insights.
During this initial three weeks, I’ve clocked up over 70 actual face to face meetings with over 160 people in total as I have sought to immerse myself in understanding the needs of different stakeholders. This is in addition to being involved in four workshops and participated in a couple of local events.
The overwhelming enthusiasm and commitment to creating growth and jobs through fintech developments is very powerful, going forward I am hoping we can channel this high energy into productive results and outcomes.
Big thanks to everyone who has been in touch and reached out in since the start of the year, there has been a hugely enthusiastic response from all quarters of Scotland as well as all corners of the world, from New Zealand to Africa to Europe and the USA.
During this early flurry of activity, I am endeavouring to keep up to date with the positive flow of engagement and arrange the meeting and call requests as they come in!
Although managing the diary to meet and talk to as many people as possible has, I must admit, been a challenge and will be as I embrace the strong appetite for people to be involved.
Thankfully, I’ve only missed one appointment so far, with my dentist for a checkup!
Key Foundations
Amongst the many meetings, I have had very constructive discussions with key people from Avaloq, Lloyds Banking Group, HSBC, University of Edinburgh and Scottish Enterprise who have already strategically committed to getting FinTech Scotland of the ground.
This enables FinTech Scotland to start on a journey with confidence, which was very much reinforced when meeting Paul Wheelhouse, Minister for Business,
Innovation and Energy.
The Scottish Government’s very real and practical commitment to creating a thriving fintech environment in Scotland was a key factor for me in taking on this new challenge.
I must add that this fast start could not have been achieved without some key foundations being in place.
In this respect, an enormous thank you to the Edinburgh Innovation (EI) team at the University of Edinburgh, who have provided invaluable support in these early days of establishing FinTech Scotland’s operations.
It is fantastic to be working with the EI team to ensure we put the right foundations in place for the FinTech Scotland enterprise in order that we can maximize the
emerging opportunities.
Opportunity Knocks
One thing that has been really encouraging in these early days, is the contact from half a dozen fintech enterprises who are looking to move to Scotland, either from other parts of the UK or wider afield.
These entrepreneurial firms are all at various stages of their growth and scaling up but they all share a common interest in being part of Scotland’s fintech environment to take their innovative enterprises to the next level.
Explaining to the various firms how we and others in Scotland can support them in their growth and job creation aspirations is hugely motivating and something we will be building on in the coming months.
Running Around
I am hoping that scribbling this blog over the coming weeks will give me the opportunity to reflect on whether I have been focusing on the right priorities for FinTech Scotland and consider whether upcoming actions will enable us to make progress.
My other way of finding reflection time is to just get out and run, whatever the weather! Running is my other passion, alongside fintech, being a wonderful way take time out from the fast moving working life to consider the journey ahead and what can be achieved. More on this to come.
This fintech journey is going to be a marathon’ rather than a sprint and I am looking forward to sharing the experience with you through FinTech Fuse!
Previse’s expansion in Scotland. Interview with the Chief Product Officer
Earlier this month we received some great news from Previse. The B2B payment decisions start-up managed to secure £800k R&D grant from Scottish Enterprise in order to to set up an new development centre in Glasgow, creating 37 new data science jobs.
FinTech Scotland spoke with David Brown, Previse’s Chief Product Officer to understand the decision process that lead to the firm’s move this side of the border.
How did Previse come about?
We identified that current solutions to financing trade finance assets involved too much process change and this change more often than not would lead to the demise of payments in the supply chain as most focused on the Top suppliers i.e. the 80/20 rule. The majority of any major corporate spend is with the top 100-200 suppliers, the remainder [referred to as tail spend] can involve thousands of smaller suppliers more often than not most SME’s would fall within this segment. Previse identified a huge gap in the current market offerings and their failure to address this segment and have now developed a solution specifically to address SME payments within the Global Supply chain using, with virtually no process change to deploy.
Why did you choose Scotland to establish your new base?
After meeting with the Scottish Enterprise, Datalabs and the university professors, we came to the conclusion that the right building blocks are being put in place to address the skills gap that is required to enable a digital world and from there a fintech solution.
And why did you choose Glasgow specifically?
This was perhaps the hardest of the decisions but based on the fact the JPM, Barclays and MS have their operations in Glasgow, helped in our final decision.
Where would you like to see improvements in the Scottish fintech proposition?
Fintech in our opinion involves several key ingredients; technology, liquidity and legal without this it could become just tech. It is important that whilst we challenge the use of new technologies, we also challenge our legal frameworks and boundaries to ensure the asset is attractive for finance. Active collaboration between all parties is necessary and should be without conflict as the outcome benefits all.
In your opinion what is the biggest challenge Scotland is facing when it comes to becoming one of the leading fintech hubs?
References. We need strong case studies as change is hard but once you get through the inertia of change it becomes the norm. Scotland must collaborate, promote and get behind platforms, to generate the need and desire for talent, after all this is a new world with new challenges but also amazing opportunities to build world class talent and present a showcase of successful reference accounts to build upon.
Can you tell us about some exciting developments at Previse?
We are in the final stages of some major announcements both in partnerships and in client adoption and are busy hiring in Glasgow to support our growth. Partnering is key to Previse as we have built an enabler and each partnership we announce confirms our strategy and validates our vision.
You told us previously you’d like to spend more time in Scotland. What are the thing you enjoy doing/visiting when you’re up here?
Now I am here after working away for close to 30 years, I am looking up and finding everyone that meant something to my life and growing up, so catching up with neighbours, school and work friends and ex work colleges etc. is top on my agenda.
Are you planning on moving permanently to Scotland?
You never say never and I would like to think that is possible at some stage, I may need help with my Wife Sammi.
You told us previously you’d like to spend more time in Scotland. What are the thing you enjoy doing/visiting when you’re up here?
One of my best friends is Colin Barr who happens to own the Bierhall in Gordon Street so it would have to be that one.
What’s your favourite place in Scotland?
Loch Lomond, I have fond memories of my childhood and swimming there and also my big sister Ireney had her ashes spread there so it is now a very special place for all of us.
Edinburgh Hosts Event On Personal Data And Open Banking
New rules demanding a new approach
The EU’s PSD2 legislation that is closely aligned with the work of the Open Banking Working Group is going to make a significant difference to the operation of financial services both in Britain and in Europe, effecting far-reaching changes for years to come.
As of 18 January, consumers, SMEs and even corporates will be offered the opportunity to consent to having their personal data shared securely with financial institutions other than their own bank, with the option of choosing new products and services.
If this were not enough, the General Data Protection Regulation that comes into force across Europe in May will place far greater demands on companies to protect their customers’ data than at present and gradually raise customers’ attitudes towards the management of their personal information.
It would seem that the traditional and emerging finance communities as well as consumers are going to have varying expectations on how the new rules and ways of operating are going to work.
Why do Open Banking and GDPR matter now?
The urgency for innovation has rarely been more felt and is going to become a pressing need, if it isn’t already.
The good news this week at least is that Edinburgh, where much of this disruption is going to have significant impact, will be discussing these issues and more in a one-day event hosted by the Trust in Digital Life association, The ID Co. and the School of Informatics University of Edinburgh.
The objective of Whose Data Is It Anyway? is to achieve a fresh perspective on how potential conflicts of interest can be avoided in the future, particularly in the context of open banking, and what the landscape might look like in a few years’ time for banks, businesses, SMEs and the rest of us.
Whose Data is it Anyway? takes place at the Informatics Forum, University of Edinburgh, starting with breakfast from 08.30 to 09:30 and finishing at 15.15 on Thursday 14th December 2017. Attendance is free when you register in advance.
(Once you’ve registered, tweet to #whosedata)
About TDL
The Trust in Digital Life (TDL) community comprises leading industry partners and knowledge institutes that hold trust and trustworthy services to be an essential ingredient of the digital economy.
TDL members are committed to enabling a trustworthy ecosystem that protects the rights of citizens while creating new business opportunities. To this end, TDL researches, pilots and incubates trustworthy ICT services and technologies in an innovative environment.
TDL forms the bridge between citizens entitled to the best possible services and an industry that develops devices, applications and services that protect them from Internet threats and provides them at an affordable price. A major focus is on the research and business agenda of the European Union.
From banking to healthcare, driverless cars to online shopping, every aspect of our 21st century digital world is dependent on varying degrees of trust between consumers and suppliers, governments and their citizens.
The continual threat of cyber-attacks has the potential to undermine our confidence in taking full advantage of the opportunities available to grow the digital economy, not only in Europe but across the world.
The objective of this community of industrialists, entrepreneurs and academics is to provide the tools and awareness that the wider community can benefit from in their daily digital lives. Their mission is to create a trusted ecosystem based on innovative and trustworthy ICT products and solutions that protects the data and assets of European citizens and enterprises.
www.trustindigitallife.eu
What’s the value of fintech?
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Improvements to financial inclusion
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Enhanced customer experience offerings
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Greater transparency
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Modernised security and compliance solutions
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Additional support and guidance.
Fintech – what does the future look like?
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a strong understanding of current business operations
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a keen awareness of the signals of change
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ability and appetite for change and understanding of the potential barriers
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aligning business objectives to the fintech strategy
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innovation activity focused on large scale paradigm shifts as well as incremental improvements.
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What will we be famous for?
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What role(s) do we want to play in our customers’ lives?
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Where should we play?
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How can we win?
Challenger banks – looking ahead
Shifting Landscapes
Over 50 banking licenses have been granted since the 2008 financial crisis and the market is becoming ever more saturated – particularly when looked at through the lens of the challengers. The Challenger’ label is now more commonly used as shorthand for a subset of the market and with such a complex and diverse ecosystem, we may need new ways of analysing the strategies of these banks.
As many of the challengers begin to mature and develop their core offerings, their futures become much more interesting that their pasts. This year’s KPMG Challenger Bank report discusses the current state of challengers, before moving onto their likely responses to the upcoming drivers of change.
Five key drivers
In the last 12 months, it has become increasingly clear that there are a number of specific trends that will affect banking in general, but the response from the challengers is perhaps the most interesting aspect for the long term nature of the ecosystem.
Brand ”“ with such a diverse and saturated market, consolidation is inevitable. Challengers have begun a personality war’, aimed at winning the trust and advocacy of customers.
Customer experience ”“ challenger banks are still predominantly focused on a differentiated customer experience throughout their operating models. This can often help drive home their offering within specific niches.
Technology – many challengers are using new technologies to diversify and hone their product portfolio. There are increased forms of platformisation as emerging technology is deployed across the industry.
Deal-making ”“ partnerships and acquisitions will likely be critical to the future of challengers. Partnering allows them to leverage external expertise but the strategy, timing and execution will be key.
Regulation ”“ challenger banks continue to come to terms with the complex regulatory environment. Open Banking, the Second Payment Services Directive (PSD2), and the General Data Protection Regulation (GDPR) may deliver as many challenges as opportunities.
Female tech role models ”“ We need you!
If gender issues are already a priority for our large financial institutions, our growing FinTech community also has to respond to an important reality: research by Digital Scotland reveals only 18 % of people in tech roles are female.Scotland’s tech scene is one of the country’s most vibrant and rewarding places to work. Young women can have a fantastic career in digital technology. But if we want to reap the benefits of gender diversity credible role models are key.
The Digital Technologies Skills Group in partnership with Girl Geek Scotland are looking for young women (students, professionals or simply tech enthusiasts) to volunteer as role models and mentors for school age girls.
They’ve created training and support materials (webinar, guidance materials, classroom resources, and case studies) to help volunteers with their mentoring.
Ian Hanson from Skills Development Scotland told us:
“We know there is an issue with insufficient women in tech roles. Financial Services and FinTech are no different. It’s crucial for the success of our industry and the vitality of our workplaces that we attract more talented, creative women into these roles. That’s why we’re looking for enthusiastic female role models who can inspire others to join them.”
What is fintech and does the answer really matter?
There’s no simple answer
What’s a fintech company?
And so what?
David Ferguson – 1 year as a fintech envoy for Scotland
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
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.