Data and artificial intelligence driving the surge in Scotland's financial technology sector
Scotland's fintech sector is experiencing significant growth, with a ten-year research and innovation roadmap aiming to ensure the continued expansion of its start-up scene over the next decade. The sector, currently home to over 200 fintech start-ups and numerous established financial services providers, is expected to contribute £4.4 billion to the economy.
University programs and funding play a crucial role in fostering fintech innovation. Scottish universities, such as Glasgow, Edinburgh, and St Andrews, develop innovative technology that underpins the growth of the sector. Government-backed schemes like the Scottish Proof of Concept Fund support the early to mid-stage commercialization of these ideas, encouraging academic entrepreneurship.
Scotland's vibrant fintech hubs, notably Edinburgh and Fife, act as ecosystems where start-ups, scale-ups, and service providers can collaborate and grow. Fife, known as Scotland’s Payments Capital, attracts a concentration of payment-related fintech investment and companies.
Collaboration with financial institutions and regulatory support is another key driver of fintech innovation in Scotland. The Financial Conduct Authority (FCA) engages with fintech firms, fostering initiatives that leverage technology to improve financial service efficiencies. The FCA also facilitates conversations among regulated firms to streamline regulatory processes and supports emerging technologies like open banking and open finance.
Industry-led innovation groups, such as those spearheaded by Edinburgh-based fintechs like Aveni, are shaping the future of technologies within financial services. These groups promote innovation and collaboration between fintech start-ups and established financial sector leaders.
Notable collaborative efforts between financial institutions and start-ups include Lloyds Banking Group's Launch Innovation Programme and TSB and Phoenix Group's innovation labs. The University of Edinburgh's Bayes Centre hosts several major financial institutions, including abrdn, a global asset management company collaborating on the Centre for Investing Innovation, a £7.5m, five-year research project.
Scotland is the second-largest recipient of fintech greenfield Foreign Direct Investment (FDI) in the UK, accounting for just over 9% of total projects. Overseas companies choosing Scotland as a base include YayPay and Pace AP from the US, WeFund from Australia, and Pulse Market from Ireland.
The Data Lab, a significant resource in the Scottish fintech cluster, connects financial giants with fintech start-ups and hosts events like the annual Data Fest. The University of Edinburgh's AI Accelerator Programme provides a unique combination of training, mentorship, and access to expertise for start-ups and businesses. Edinburgh's Smart Data Foundry encourages innovation and collaboration, receiving £22.5m from the UK Government in 2020.
The growth of Scotland's fintech sector is driven by its strength in data, AI, and machine learning, which are boosting the scale-up of commercial fintech ventures. As of now, 8% of fintech companies in Scotland have grown into large companies, while 1% are listed, 1% have been acquired, and 2% are unicorns valued at more than £1bn.
Looking to the future, the development of joint initiatives between the industry and academia is a priority for the continued growth and leadership of Scotland's fintech and financial services sectors. Blockchain could contribute $1.2 trillion to the global economy by 2030, with significant contributions from Scotland. For more information on Scotland's blockchain opportunities and the industries and start-ups shaping this sector, download the report.
- Scottish universities, like Glasgow, Edinburgh, and St Andrews, leveraged by government-backed schemes such as the Scottish Proof of Concept Fund, develop and innovate technology that fuels the growth of Scotland's fintech sector.
- Collaboration between fintech start-ups and established financial sector leaders plays a significant role in the future of technologies within financial services, as demonstrated by industry-led innovation groups, such as those spearheaded by Edinburgh-based fintechs like Aveni.
- Entrusted with connections between financial giants and fintech start-ups, The Data Lab has a crucial role in the ongoing growth of Scotland's fintech sector, contributing to the potential $1.2 trillion global economy contribution by blockchain by 2030.
