The Courier & Advertiser (Fife Edition)
Fintechs much to gain by breathing new life into traditional bank sector
WORK: Old and new institutions benefit from close collaboration
Several years ago fintech was proclaimed as the digital replacement to our high street banks.
Fintech describes software, technology or digital products used in the financial industry.
Applications range from payment apps to digital currencies to peer-to-peer lending platforms.
Many fintech businesses are early stage or start-ups.
A number of traditional banking institutions have come to realise that fintechs are agile and well-placed to find innovative solutions to customer demands and financial regulations.
Fintech’s adoption and application of cutting-edge technologies, such as blockchain and artificial intelligence, is attractive to financial services giants keen to modernise.
The attraction is mutual, with fintechs seeking to take advantage of the inroads into consumer and business banking which traditional institutions offer, as well as their wealth of customer data and regulatory understanding.
This is the basis of a growing partnership between the sectors, allowing fintechs to grow while banks evolve. Not only are financial institutions acquiring and investing in Scottish fintech start-ups, they are collaborating and partnering with them.
This is driven by a recognition of the need to evolve, and the disruptive impact start-ups can have on the financial sector as a whole.
However, some of the most successful fintechs aren’t setting out to transform the banking industry, despite the claims of a digital fintech revolution. They are instead seeking to solve smaller-scale problems that plague the sector.
Areas being targeted include online anti-money laundering compliance processes, cloudbased payment platforms, and transaction accounting systems.
There have also been some more high-profile examples of Scottish fintech success, such as the sale of FreeAgent – an accounting software specialist aimed at micro-businesses – to RBS for £53 million this year.
Scotland is the ideal setting for a thriving fintech economy given its financial services and banking heritage, burgeoning community of data scientists and software developers, and the numerous business accelerators aimed at connecting investors, entrepreneurs and mentors.
Several Scottish universities are also offering fintech-specific courses to aid the growth of the skilled workforce.
The recent establishment of FinTech Scotland, formed by the Scottish Government, financial services sector and Edinburgh University to drive national initiatives aimed at growing Scotland’s presence in the fintech market, demonstrates the collaborative efforts to make Scotland a fintech hub.
It is clear the relationship between the banking sector and Scottish start-ups is flourishing.
Fintechs are breathing much needed life into the traditional banking industry, whilst financial institutions are providing the capital and regulatory backing the sector needs to develop 21st Century solutions.