These findings come from the FRP Advisory’s latest report, A fork in the road: The future of UK fintech, in which more than 250 senior decision-makers within the UK fintech industry were surveyed. In Scotland, leaders working in fintechs in the hubs of Edinburgh and Glasgow were questioned.

While two fifths of Scots fintechs have flagged concerns about the potential risk of failure by the end of 2023, the report underscores that fintechs in other UK nations and regions are in fact more concerned, with the figure being 42% for firms in the North of England, 46% for those in London, 56% for those in the North East of England, and 58% for those in the Midlands.

The report also highlighted that 26% — the highest proportion recorded — of Scots fintech firms reported a fall in valuation over the last 12 months, as they continued to grapple with rising input costs. Further, 34% expect their valuation to decline over the next year.

A polarised funding environment for fintechs is also deepening the challenges for some Scots firms, while others appear to be clinching the funding needed, suggesting a fight among venture capitalists and lenders. Specifically, 36% of firms have found funding harder to come by over the past 12 months, while 44% have said they’ve accessed finance with greater ease.

This polarisation is apparent in firms’ plans for the future: 70% of the business leaders surveyed said that they had reviewed and amended their exit strategy in the last 12 months. The most popular option was planning to find new funding or investment (46%), followed jointly by seeking new consolidation or acquisition opportunities (40%).

Speaking on these findings, ​​Michelle Elliot, Restructuring Advisory Partner at FRP, said: “There’s no denying that fintech firms in Scotland are clearly finding some aspects of life challenging.

“While many have struggled to grow in the last year and, for many, it’s proving harder to source funding, we can take heart from the resilience that firms are showing in the face of these conditions.

“It’s still concerning that two in five worry about their ability to trade through the next six months but that’s the lowest proportion in the UK. That spirit of enterprise and ambition gives me confidence for the future.”

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In the last few years, Scotland’s fintech sector has noticeably gone from strength to strength, and it’s this strong foundation that perhaps is the cause for Scottish fintechs having the lowest proportion of uncertainty in FRP’s survey.

For instance, in 2022, Scotland saw record levels of investment, receiving over £300 million in funding which marked an increase of 200% over the previous year. Further, the number of SME fintech firms increased to 211, a 13% increase over the year, driven by both new startups and international firms setting up in Scotland.