FinTech 2017: Facing the Future
Financial technology is on the precipice of global disruption. The rise of challenger banks, APIs and customer-driven brands are only the first signs of this sea change. Can Scotland lead this charge? Can Scotland survive?
DIGIT’s fourth annual Fintech Summit was held in Edinburgh last week, providing Scotland’s largest forum for discussions on the country’s financial technology scene and how the ‘parish’ can become a world leader in the future of finance.
Keynotes and panels from the event emphasised the pace of Fintech innovation and its resulting challenges, but also how Scotland and the wider landscape can face them.
He said: “People want something different. What we’re seeing now is a number of forces coming together. Regulators are saying we want more banks. Consumers want more and better products and are underwhelmed by customer experience. Payment systems are opening up and allowing new entrants into the market.”
Underpinning a customer-driven focus is tech that can facilitate immediacy, simplicity, and clarity in finance, explained Sawyer. “All of that is happening as new technology occurring around us – whether that is smartphones, internet, algorithms, etc. So this is a perfect moment where technology and financial services can come together.
“We are one of the first banks to be completely in the cloud. We use Amazon Web Services – everything is up there. We want no servers in our office, everybody has laptops. There is absolutely no infrastructure. That means our IT support is incredibly straightforward. But it also means that we’ve got flexibility in what we do, and also a very low cost of ownership. We have the scalability that Amazon and Google Cloud offer us.”
“The key message is, ‘Just because I hate it doesn’t mean it’s not going to come true,’ said Bailie. “Every two years the power of computers doubles… The consequential effect of what’s coming has the power to fundamentally reshape the economy, how businesses interact and where the economic value is in the world. What does this mean for us as FinTechs?
“The problem with the banking industry is that we’ve been entirely product-centric for a very long time. That’s not what customers need. We’re trying to find people that can help us navigate that new world, a world which pivots the entire industry on customer need, not on product. That’s going to have to mean collaboration. Which is why we want a massive global hub here, We think we can build it here. It’s a backbreaking flight to San Francisco and Shanghai.”
Mary Harper, Head of Strategy, Customer Data & Digital Analytics for Standard Life and its associates in Aberdeen, warned of the future that awaits companies who fail to absorb innovative tech and customer-centric practices. Harper said: “Everybody has had enough of irrelevant spam-based push marketing.
“Standard Life has been run for 180 years. We’ve got multiple products and a vast customer-base that’s hugely diverse, and it’s complicated. It’s hard to prioritise it and sort and manage it, but we have to do it or someone’s going to come along and disrupt us.”
Facing the Challenge in Scotland
Mackenzie said: “As we all know there are many different hubs starting to grow around the world. Why are we not a big callout on the map?
“If we think about our academic stronghold in Scotland – Edinburgh, Glasgow, Aberdeen – we have some fantastic skillsets coming out of our own universities, not least the data science capabilities that have come through Edinburgh and Strathclyde University. And then think about some of the groups surrounding universities such as The Data Lab or CodeClan, fuelling the next generation of data scientists – it’s quite phenomenal. And then of-course we have a rich financial services heritage in this country. You can look across any part of financial services and find experts.”
Mackenzie outlined four steps that Scotland could take to nurture FinTech growth internally, before expanding its innovation outwards to the rest of the globe: “Firstly and importantly, there’s a real need to amplify our profile in Scotland. We tend to be fairly conservative and reserved about how we talk about the opportunities we have. We need to shout a lot more.
“We have some fantastic hubs here in Scotland. We need to make sure that we nurture that infrastructure. If you look across the globe you’ll see the physical incarnation of FinTech hubs – FinLeap in Berlin, The Floor in Tel Aviv.
“Talent from the universities. It’s important to wrap our arms around that, but not just that talent, we have many in our schools and college network that we need to reach out to and pull into what we do.”
Mackenzie concluded that by creating a support network businesses might be further encouraged to innovate, and commended the work of the FCA so far in its delivery of advice to businesses.
During one of the interactive panel discussions held throughout the Summit, Grady emphasised that a busier FinTech scene in Scotland would encourage innovation across the sector: “I’m not worried about competition. The thing for me is understanding what is out there and harnessing that capability, to understand where we are and say, ‘These are the things we need to work on’. I think Scotland is small enough to be like that. Collaboration will work really well, and we won’t get many areas of competition.”
Collaboration, Integration and Nurturing
Grady’s comments led neatly into the third main theme of the Summit – the role of unity in fostering Scotland’s potential. The topic was expanded by Dan Posner, Director of Business Products & Head of Digital Innovation at Barclays.
“Collaboration is not in banks’ DNA,” said Posner. However he underscored the fact that incumbents and challenger banks could easily work together to foster the expansion of FinTech in Scotland.
“What we know is that developers and customers alike have a tremendous amount of power, because they’re going to be the arbitrators of how well we are going to distribute our products in the future. The future is literally in the hands of FinTechs as to whether they want to take products from Barclays, RBS, or somebody else.
“Traditionally banks have been the custodians of customer data – ‘Keep data safe, make sure the customer is ok’. The FinTech revolution has basically said, ‘Well actually, there’s value to that data, you can serve customers better with it’. That’s given the banks the rationale to innovate, to get new products and services to market. So how do we get good at collaborating with developers?
“The FinTechs can come and visit me for scale. They can do something with me which will give them access to the customers that Barclays has in its space. There is something about being associated with a trusted brand that is tremendously powerful. We’ve seen with businesses that we’ve collaborated with and other banks have collaborated with, if they want an IPO (initial public offering), investors will be interested in helping with that.”
“We over the years have worked with a number of different banks,” McCallum said. “There’s lessons to be learned how to go about that.”
McCallum continued: “We were selected to work with RBS and NatWest about a year and a half ago, and they were out to find a partner to offer solutions for their small business banking customers around managing cash flows, managing their expenditures, managing their finance. So it was wide, including people from Brazil, America, Canada, Australia and New Zealand. Since then, we’ve been working very hard, very much inside the RBS Group, to bring our offering to the market.
“The interesting thing from a customer point of view is that customers get access to FreeAgent for free – so RBS fully funds FreeAgent licence for their customers – on the basis that there is data sharing going both ways. So we will actually get the bank feeds, importing into FreeAgent, but there’s also data flowing back the other way. And I think there’s a load of stuff that we can do to bring that even more closely together – there’s some quite exciting developments that we are working on jointly that will really show the power of that data.”
Facing the Future
At the first ever FinTech Gala Dinner, held after the conclusion of the first day to 150 of the 300 Summit Delegates, MSP Cabinet Secretary for Finance & Constitution Derek Mackay delivered a speech on just how Scotland is squaring up to a FinTech future.
MacKay said: “As other countries and other communities and hubs catch up, we want to try and stay ahead of the curve. We know that events like this will help provide for what officials have described as a ‘healthy ecosystem’ – i.e. people talking with each other, and then building the networks raise their game and try and reach out.
“We want to provide both stability and stimulus at the same time, as well as sustainability. The vision for Scotland is high tech, high-value jobs and a low-carbon economy, as well as more effort in innovation, research & development and internationalisation.”
DIGIT was also delighted that Fintech Scotland, the new organisation focused on making the country a pioneer and leader in financial technology chose to launch their brand – and website – at the event.