Scotland is one of Europe’s leading financial centres and internationally recognised as the UK’s largest outside of London. With established global financial institutions such as RBS, Standard Life Aberdeen, JP Morgan, to name just a few, and over 100,000 skilled and experienced technology professionals, Scotland offers the perfect mix of opportunities and talent to establish a successful fintech sector.
The determination and efforts of the industry, government and academia in Scotland has made it into a growing hub for the fintech sector. Millions of pounds worth of investment has been attracted to Scotland in the last five years and more than 60 fintech businesses, from startups to listed companies, are now based in the country.
The efforts and initiatives are intensifying, with the most recent example being the launch of Scotland’s first ‘Fintech Skills Academy’ in Fife. The Academy will offer courses to both young people about to start their first job and adults with a background in IT who want to update their skills and knowledge to futureproof their careers. The recent Fintech Fortnight event is another example aiming to showcase Scotland’s fintech sector to the world in a bid to attract more businesses.
As Scotland continues to be ranked as the best performing destination for inward investment outside London for the last six consecutive years, we caught up with Graham Hatton of Scottish Development International (SDI) who is their Inward Investment specialist for Fintech. Graham gave us some very interesting insight into the inward investment opportunities in the fintech sector in Scotland, as well as an overview of the sector in general and the current challenges and solutions.
Could you give us an overview of the sector in Scotland?
Scotland has always had a very strong history of financial services and the last fifteen years have seen an emerging tech scene as well. The culmination of these factors has led to a strong fintech sector in Scotland. The fintech component has been especially strong in the startup ecosystem as there is a lot of potential and growth in the fintech startup community. In addition to the burgeoning fintech start up scene, a number of corporations have technology centres in Scotland which have been very efficient in developing technology functions for the big players to stay ahead of the curve in the fintech revolution.
What do you think is the most exciting thing about Fintech in Scotland?
From a career perspective, there is a broad range of opportunities available in Scotland’s fintech sector, which was not the case even 5 years ago. For instance, people working in banking and asset management have a variety of opportunities in big corporates as well as startups. There are also opportunities ‘in between’, such as companies like FreeAgent who have been acquired by RBS but still operate with a startup mentality. There are very limited cities in the UK that offer such a wide variety of employment opportunities, London being the obvious example, but Scotland is gradually becoming an employment hub with a plethora of financial services and tech opportunities being offered.
In recent years there has been significant growth in collaborations between big corporates and startups. Big corporates generally struggle to innovate quickly, which is where they are seeing the opportunity to partner with startups. The mutually beneficial arrangement is helping big corporates to deliver better services while giving the startups an opportunity to reach a large customer base quickly.
Why should investors make inward investment in the Scottish fintech sector?
There are certain advantages that Scotland offers across multiple sectors, such as quality of life, access to broader pool of talent, lower costs, and so on, but from a fintech perspective there are three key things that Scotland has to offer which makes it an attractive prospect for inward investment;
- Access to markets: For companies/investors who don’t have a presence in Europe, especially Investors from Asia, UK is the stepping stone to the European markets. Most investors choose London to set up their base because of the massive market in the city, but building an entire company in London has its challenges. Building and developing a technical team in London is particularly taxing because of the high costs and low staff retention rates. Outside London, there are many cities in the UK competing for investment opportunities, but Scotland has an edge because of its strong financial services market characterized by the multinational companies headquartered in Scotland.
- Talent: Scotland has a diverse pool of talent. There are people in the financial services industry working at senior levels in global financial corporates headquartered in Scotland who understand the challenges and can see the opportunities in the industry. There is no shortage of technical skills and talent due to the efforts and initiatives of Scottish universities. Scottish Universities have been researching areas such as AI, machine learning, data analytics and cryptography for quite some time, have started to become not only relevant, but crucial, to running businesses today.
- I think the most important thing, which applies to Edinburgh in particular, but also to Scotland in general, is that it is well networked. All the big financial services and tech players in Edinburgh, such as Standard Life Aberdeen, Baillie Gifford, Amazon, the School of Informatics, and Codebase, are in close proximity to each other. If someone wanted to , they could easily do a ‘fintech walking tour’ as the offices for all these major organisations are located so close to each other, although that’s unlikely as it is very hard to compete with Edinburgh’s other tourist attractions! Since the city is not split in distinct areas for different market sectors of the city, everyone is going to the same bars, cafés, and the same meet-ups and networking opportunities. In the fintech sector, the opportunity to make connections and network with people is very hard to quantify. It goes without saying, however, the easy access to people you get in Scotland is very valuable and hard to find in other parts of the UK, making it a USP of the fintech sector in Scotland.
Where can the majority of inward investment in Scotland’s fintech sector come from?
I’ve found that Scotland is attractive to companies from several regions. First, companies in London who are going through the experience of scaling but cannot operate entirely from the city due to the challenges discussed previously. Many fintech companies have started partially shifting their operations from London to Scotland in an arrangement where they are headquartered in London, but R&D operations are carried out in Scotland. A couple of recent examples are Previse and Modulr Finance who have set-up in Glasgow and Edinburgh respectively.
Second, the USA has always been a popular source of investment opportunities for Scotland. Many US corporates have established themselves in Scotland, such as JP Morgan, Morgan Stanley and Blackrock. Many of them have been developing their technology functions in Scotland, which has generated interest from similar companies in the US who are also planning to expand their technology functions. A recent example is Renovite who have development a development team in Fife to access the Payments expertise there.
Third, there are many companies from Asia and Australasia looking at the UK market. For Fintechs in Australia, the UK is the number one market for them to expand into and is also a stepping stone into Europe. They see the benefits of moving to Scotland from a cost perspective, compared to the rest of the UK. We’ve also got interest from companies in Singapore and Hong Kong who are interested in setting up operations in Scotland as part of their broader UK operations.
What are the Challenges faced by Fintech sector in Scotland?
I believe one of the biggest challenge is making people aware of the breadth of career opportunities in the fintech sector, especially for areas such as payments, software development and engineering, as most of the companies in these sectors are not household names.
The biggest attraction in Scotland is talent, but the question remains – as demand increases what can we do in the future to maintain a regular influx of talent in this sector? It is great bringing companies in and encouraging companies expand to Scotland, but at the same time it is important to ensure the sustainability and the growth of the companies. There is a huge amount of work going on to make sure that the talent pipeline is full, which includes school leavers, universities graduates and apprentices.
I also think it is important to work with the Scottish diaspora, in the UK and the rest of the world, to make them aware of the opportunities available in Scotland. It is crucial to target people who are thinking of moving back to Scotland for work as maintaining a constant stream of talent is as important as attracting companies to Scotland.
Scotland is in very strong position right now. To combat potential challenges, the focus should be on growing the talent pool and increasing the number of opportunities for companies to take advantage of the large amount of data expertise available in Scotland.
In conclusion, where do you see the future of fintech in Scotland in the next five years?
I’m confident that in five years’ time Scotland will be a leading global fintech centre. The close-knit eco-system, with a focus on innovation, will support collaboration between start-ups, corporates and universities. This will create a wide range of attractive career opportunities for graduates, returning diaspora as well as people moving to Scotland for the first time.