What Is Fintech

Financial technology, or fintech, describes the use and application of new technologies to improve the delivery and use of financial services. The sector includes cryptocurrencies such as Bitcoin and Facebook’s new ‘Libra’ service. Fintech aims to compete with traditional financial methods through the delivery of innovative new financial services. The emergence of widespread access to online banking and financial management has led to an expectation that every business can provide a seamless mobile experience, whether they’re a small enterprise or a multi-national corporation. This has made the adoption of fintech a necessity rather than simply something ‘progressive’ or ‘forward thinking’ a business can consider.

The quick growth and addition of new businesses in the market has led to massive investment from major corporations. In 2018, US FinTech companies raised over $12bn – a 43% increase from the previous year’s figures.

Scotland’s FinTech Industry

As a rapidly increasing industry in Scotland – predominantly in Glasgow and Edinburgh – the rise of fintech has catalysed a huge change in the landscape of financial services. Fintech companies range in scale from SMEs and startups all the way up to the giants of traditional banking.
Edinburgh’s versatile nature affords it a plethora of opportunities unique to the capital. According to the Deloitte ‘Global FinTech Hubs Federation’ report 2017:

“Edinburgh has all the component parts to enable a thriving FinTech ecosystem and in an area of roughly one sq. mile across the city centre, one can access major FS organisations, deeply experienced technologists, highly intelligent and practical academics and secure early stage funding.”

These factors have all contributed to the rapid expansion of the sector in recent years. At the last study, the Global Financial Centres Index found that Edinburgh ranked as the 8th strongest financial centre in Europe, and the 35th in the world.

Scotland’s fintech ambitions aren’t exclusive to Edinburgh, however. The country is home to over 100 fintech companies and has a fintech presence in Aberdeen, Stirling, Dundee and Perth. These cities are helping Scotland’s massive growth in the industry, with FinTech Scotland (a joint initiative between the Scottish Government, the University of Edinburgh and a number of financial services companies) reporting that the number of financial technology companies starting or basing themselves in Scotland tripled in the first year of their existence.

Fintech Overseas

This fintech revolution is connecting people worldwide, with countries in Africa and Asia growing their economies at an exponential rate as a result of the increased access to the technology provided by fintech innovation. According to the IMF, Sub-Saharan Africa is the only region in the world where close to ten percent of GDP from transactions occurs through mobile money. This compares with just 7 percent of GDP in Asia and less than two percent of GDP in other regions. In 2007, in Kenya, M-Pesa was created by Vodafone and Safaricom, as a mobile phone-based money transfer, financing and microfinancing service. It now boasts over 30 million users, in ten different countries, including D.R Congo and Afghanistan.

In countries all around the globe, people are relying more and more on fintech for day to day purposes. According to a 2017 study by Accountancy firm Ernst & Young, 69% of China’s population, as well as 52% of India’s, are regular fintech users – with this number undoubtedly having increased since. This has led to an increased emphasis on the funding of FinTech startups in Asia. In the second quarter of 2018, there were 132 funding deals for FinTech startups in Asia, up from 91 in the same period of 2017. In the “India Fintech Report 2019” by data portal Medici, it was revealed that India is now the world’s second-biggest fintech hub after the US, with over 2,000 startups operating in the sector.

Clearly this is still an emerging market, but it is one which has attracted an incredible amount of funding and will be at the very core of our finances in only a few years. Its success is inevitable, which is why the UK must take the initiative and put itself at the forefront of fintech adoption and innovation.

If you’d like to make your next hire in fintech, or are interested in a career in this fascinating sector, just get in touch.

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