In January of this year, Stephen Ingledew was appointed CEO of FinTech Scotland. Nine months into the role, Pete Swift catches up with him to discuss progress, priorities and the importance of projecting a positive international identity in spite of Brexit uncertainties.
FinTech Scotland was established at the start of 2018 with a mission to grow the Scottish Fintech sector: creating jobs, attracting inward investment and improving co-ordination and collaboration across the ecosystem. Alongside economic development, the organisation is also aiming to leverage the social impact of Fintech, helping to promote financial access and inclusion through technological innovation.
Against this remit, I begin by asking about the initial progress that has been made over the course of the year:
“There are a number of areas that we have made progress, one is to establish a group of Fintech enterprises of all shapes and sizes and grow a community that’s dynamic and visible. This includes organisations that are established, organisations that are new and ones that have relocated or expanded to Scotland.
The second key area is with collaboration. There have been several good examples of partnerships forged between Fintechs and bigger financial organisations – like Castlight working with HSBC, The ID Co with Clydesdale Yorkshire, and Money Dashboard with Monzo.
This opportunity for start-ups to scale through working with bigger organisations is really something we want to build on. There’s much more to do there, and we can’t underestimate that, but there are good signs of that starting to work, and that’s a key role that we want to play in that connectivity and collaboration.
The third aspect, which is very import, is about inclusion. We want to ensure that this isn’t a small club, that this wasn’t just left to financial services establishments but open for everyone to be involved. Both for individuals with their career opportunities, because this isn’t just about people in data science and DevOps. It’s across a broad range of disciplines. Then also in how Fintech can help to reach out and enable people across the wider community, in a way that’s not been done before in financial services.”
In terms of benchmarking the progress that has been made in establishing a Fintech ecosystem in Scotland, how do we compare to other hubs internationally?
“Scotland compares well and I do think we’re starting to punch above our weight for a nation of five million people. There are a number of much bigger Fintech hubs like London and New York, but Scotland offers something different. Our size is an advantage in bringing about collaboration, helping us work across our really strong base of universities and create an innovative environment.
And this is important because Scotland’s strength is not in any one individual aspect, it’s in the sum of its parts. And it’s that collaborative ecosystem environment that we really want to build on.”
A number of the larger Fintech hubs have the benefit of a more mature, established support network. Were we late getting started and behind the curve in establishing a co-ordinated Fintech hub?
“I wouldn’t say behind the curve, there has been some great activity and some of the successful Fintech enterprises have been around a while, like Nucleus Financial and FNZ, which are certainly not new. Money Dashboard has been around for a number of years as well. So there has been progress made on an individual basis here in Scotland.
What we’ve sought to do is bring that together in a team-based approach, so rather than progress being in isolation with individuals firms, it’s the collective strength and diversity we are building on. So whether it be payments, financial security or customer engagement, we just want to pull that together into one collective voice that can then be amplified.
That’s the step change we’re working on just now. And I wouldn’t say we’re late, it’s just we’ve now moved on to the next stage of evolution.”
In bringing these areas together and building up that innovative ecosystem, are we seeing signs of growth yet?
“When we first put our semicircle graphic together detailing the Scottish sector there were 26 Fintech firms, now there are 65. So there has been considerable growth that has happened over the past nine months.
That growth has been down to three reasons. Firstly, new business being established, particularly a number coming out of the Universities. Secondly, there’s growth from organisations moving their operation to Scotland, whether that’s from the UK as with Previse and Modulr, or the rest of the world, like RenovITe from California.
Then thirdly, that growth has been from businesses extending what they do into the world of Fintech. A great example there would be Agenor ICEFLO from the borders, which has won major contracts with some middle eastern banks.
Beyond the 65 we have calculated, there are another 150 companies on the periphery who don’t consider themselves as Fintech firms specifically, but do work in the financial services area. So we could count everything and represent the ecosystem to be much bigger, but I’m not sure that really helps to identify what is going on specifically within the Fintech space. However, we are very open to firms joining the community if they feel they are Fintech focused.
And it’s not just about the numbers of firms, of course. A big part of the growth we want to pursue is helping grow the companies that are here and help them move from start-up to scale-up.”
In terms of supporting companies to scale, often when I speak with Fintechs or listen to the discussions at events, there are entrepreneurs saying that there isn’t adequate funding available locally, which can obviously make the scale process very difficult. How big an issue is access to funding and what efforts are you making to address it?
“Funding is probably the one main thing that gives me sleepless nights, and there’s not a simple solution.
In terms of availability, there is a range of funding there. There is funding coming from private sources like angel investors and Venture Capital. There are also public investments sources like the Scottish Investment Bank, and then there’s also funding available from universities.
But the connection between supply and demand isn’t happening very well, particularly at certain areas of development. So the initial start-up stage is actually fairly well covered, it’s the next phase where organisations want to scale up the operation that there’s more of an issue. For those that are looking to raise £500k-£2.5m, that’s the area where I see a real pinch point between the supply and the demand, where it could happen more effectively.”
How can this connection process be improved to make funding more accessible?
“This is partly around navigation, where to find the right type of capital at the right level, which can be a bit confusing sometimes. If I had my time again this is something I would have placed more emphasis on from the start because I think it is a valid concern from some firms.
And we do need to do more because if businesses are spending a lot of their time on where the next funding is coming from then that’s time that is not getting spent on their product, on innovation on being entrepreneurial. That’s where I worry.
There is no silver bullet but I am optimistic that we are going to see more future sources of capital becoming available. Both from a global point of view, with more interest from Middle-East and Far East. I think our improved visibility will act as a magnet in terms of attracting money in.
The other aspect is that while the funding is really an issue, there is also the parallel that if we can improve cashflow through collaboration with bigger enterprises this can provide them with a steady stream of revenue. Then this will really help support them in getting more investment.
Now it’s not a Fintech story, but Commsworld is a terrific example in terms of a role model of this method. They haven’t focused on investment funding. Their growth has come from winning customers and gradually growing and scaling. They built from small clients to one public sector contract then into another, then into large organisations.
The way they’ve gone about it, they have avoided being constantly in search of capital to grow. They’ve just focused on building their client base.”
You mentioned the importance of this collaboration with larger organisations. How embracive have the larger financial services firms been to working with Fintechs or opening up their supply chains?
“There are different answers ranging across the span of organisations, so some are definitely demonstrating very positive efforts in collaboration. Clydesdale, Prudential and Baillie Gifford are all good examples, JP Morgan have always led on this as well, and you can learn a lot from how they engage with smaller enterprises.
So in a way it’s about highlighting these examples and demonstrating the benefits of being inclusive to others in the hope that they too open up and become more involved.
I use the analogy of trying to get the big and small organisations to the disco together: trying to encourage the bigger companies not to worry about embarrassing themselves on the dance floor with their old moves, and for the small businesses not to worry about getting their toes stepped on or squashed. It’s about how we can get them working to the same tune in a mutually beneficial way.
Our role is trying to show the positives of collaboration and getting everyone involved. I see a thriving ecosystem as one that can encourage the large FS firms to be part of this. So I do spend time working with the bigger organisations as well as with start-ups, because I think the benefits are from these wider collaborative opportunities.”
Whilst I’m sure most people back the position of creating a collaborative ecosystem in principle, each of the organisations also have their own individual business imperatives. How do you balance that individual self-interest against these wider community-orientated aspirations and collective goals?
“I think this is an important point because even with establishing FinTech Scotland we had to consider those commercial tensions. We could have gone down the route of being a members-based organisation, but then there’s a tension with other members bodies, not to mention the sheer time it would have taken to try and get enough organisations on board and then try and steer that.
So we went with the route of bringing in strategic partners, not for the purpose of favouritism or to say that these were the only ones that deal in Fintech, but really just to fulfil that role of enabling us to make progress in the shorter term. And this was the mindset of the partners from the initial conversation, they did it as a strategic contribution.
We are focused on being inclusive and open, and transparent of our model and the way we operate. We also try to be accessible to everyone that wants to engage with our support, and open to be challenged if ever they did feel there was any type of in-built bias.
But at the same time, at the end of the day you have to get there. And it was Scottish Government, University of Edinburgh, HSBC, Lloyds and Avaloq that said we’re going to put the resource into this and get it going. If they hadn’t done that then we wouldn’t be here – it was a necessity.
So there’s not favouritism. We work with the other banks alongside Lloyds and HSBC, and all the universities alongside Edinburgh. But it is a balancing act that I’m very aware of. And that’s where we really do try to ensure we have a level of transparency and accessibility where people don’t feel there’s exclusion or they’re left out.
Ultimately, there’s a practical side to all this as well. There’s always going to be challenges and obstacles, but I just wanted to get on and do this – get to the action and delivery. And people can challenge and shape this as we go. It will evolve over time, but I think this was really what was needed to kick off.”
The topic of overcoming challenges and getting on with it is probably as neat a segue into Brexit as I’m going to get. How big a factor is Brexit for your plans, is it already having an adverse impact on the ability to establish a successful hub?
“It’s the uncertainty, clearly that impacts confidence around investing. The real acute issue is that if having an enterprise in Scotland restricts your access to import and export because of trade restrictions etc then you might as well be somewhere else. So that’s the key aspect.
But ultimately for us Brexit is outwith our control, so we focus on what we can control. And there are organisations branching into Scotland and setting up new offices here and that reinforces the positive message that we are trying to promote. So we’re going to the US, to Switzerland to Singapore and we are spreading that message and building the connections based on the commercial reality.
But even beyond investment, the thing that most worries me is around the talent and people. A growing ecosystem requires talent and while we are growing our talent pool in Scotland through our universities, people coming here from across the world is really important.
I worry that the impression that we’re giving out as the wider UK is not very open to people from different backgrounds and other countries. Whereas we should be saying we welcome diversity, we promote inclusion so that people are looking at this as a place they want to relocate to, not just to work but to live.”
In this regard, Scotland’s situation is very different from other parts of the UK. Certainly, we haven’t experienced the same population growth through net migration as other areas, particularly the South East. At last month’s Fintech Summit, Derek Mackay spoke about the fact that the Scottish Government is actively looking to encourage inward migration as a means to grow the economy. However, reducing migration has been a declared priority of successive UK Governments, which sends out a certain message.
Do you think that Scotland can establish an identity that is different from RUK and use this to continue to attract talent through inward migration?
“Absolutely, it’s just about making sure that we are singing the right songs, promoting the right messages and creating the right impression. But Scotland does have a particular case where we can demonstrate a much more inclusive and more open and progressive society.
Although I do think most people in the UK recognise that if you want people to feel welcome you have to do this. I think it’s just a minority that want to take Britain back to the 1950s where we all look the same and think the same. But that doesn’t encourage the right sort of society or indeed the right environment for innovation.
What I do think Brexit has done is helped reinforce the consensus within Scotland that we want to be international, inclusive and progressive. So it’s reinforced these values across the piece – whatever peoples perspectives on the way the economy should be run everyone’s been galvanised by the desire to be international.”
In spite of Brexit uncertainties and some of the other challenges you’ve discussed, how confident are you of the future and our ability to grow a successful Fintech hub here and compete with the top regions in the world?
“I’m really positive about the future, although I put a greater emphasis on collaboration than competition, it’s not about winning at the expense of others. So yes, Scotland has some distinctive attributes in a very positive way, but we’ll only capitalise fully on that if we collaborate.
I think there’s far more to be gained from working together and having the humility to learn from one another as well. Not just from your typical lead hubs, but also from your hubs in areas like Africa.
We had some great conversations with the African delegates during the trade mission over Fintech Fortnight. They’ve had some very different starting points in terms of how they are using technology, and where they can use it to include people and improve their provision of financial services. So I think if you adopt a learning mindset, you can really help your own development and the wider global development as well.
But I do think we have huge potential here in Scotland. We emphasise a lot around data, and the desire to be the data capital of Europe, and harnessing that talent in data science, analytics, AI and informatics. So the data opportunity is huge.
Secondly, I think there is our social purpose, so yes there are commercial objectives but it’s also about reinvention through Fintech to benefit society and consumers in the wider sense. Whether it be improving access and affordability of financial products. Or whether it’s helping people to understand how to manage their money, see their cashflow or improve their forecasting. These are all examples where we can help people to have a better life and better wellbeing through financial awareness or inclusion.
Thirdly, what we combine here is a heritage of experience and learnings with a culture of progressive innovation, inclusion and collaboration. And this dual combination gives us a really unique and powerful positioning which draws on the strengths of both experience and experimentation. I think that’s a really good blend of characteristics.
So I’m really positive about the future, and feel enormously privileged to be in this role. A lot of that comes down to the people we’ve got here, who are some of the most inspiring I’ve ever met. From well know figures like David Ferguson, Gillian Docherty and Melinda Mathews, to some of the start-up entrepreneurs like Phil Grady at Castlight and John McHugh at Giggly and Andrew Duncan at Soar. They are such a motiving and inspiring group of people but all with humility and a realness.
But it’s not just about the people we have involved already, or the even just the wider financial service industry. We want to grow and develop a thriving ecosystem. I always say that Fintech’s far too important to leave to the financial services industry, so we need other thinkers to come in as well and help us with our journey.”