The last two and a half years have presented significant challenges for global business. Yet despite this disruption, FinTech Scotland CEO Nicola Anderson believes the Scottish fintech sector has thrived.

And as the annual Scotland Fintech Festival approaches, Anderson says the sector now boasts a community of around 210 SMEs. A significant growth compared to pre-pandemic numbers and testament to the strength of the established community.

“We’ve lost one or two along the way sadly, but we’ve continued to gain and grow, and this really shows the capabilities we have across the financial services, fintech and broader technology sectors.”

“Even amidst this period, we have actually continued to grow as an ecosystem – and this is growth in terms of the number of fintech SMEs and in terms of investment,” she says.

During the pandemic, Anderson believes that the sector rose to the occasion and showcased its potential to deliver positive, impactful solutions for consumers and the economy – and there’s likely more to come.

“Across Covid, we saw these businesses pivot, we saw them adapt and we saw them lean into the real issues affecting people,” she says.

Amidst a spiralling cost-of-living crisis, Anderson says she is confident that the Scottish fintech sector will once again step up to the plate and aid struggling consumers.

“And as we think about the cost-of-living crisis, we’re seeing the same situation. These organisations are really thinking about the needs of people and businesses, and creating solutions that will help address, or support people during these times.”

Scotland’s innovative fintech SMEs are broad in their specialisations and areas of focus, Anderson adds. Increasingly, startups such as Inbest or Snugg are tackling issues very much at the forefront of society, such as rising energy costs or access to benefits support.

Similarly, with concerns around climate change also rising, Anderson says we also see dynamic Scottish companies emerging in what will likely be a major growth area in years to come.

“A big theme at the moment is the climate agenda,” she says. “And we’re seeing more and more innovative fintechs start to think about how they can play a part in developing practical solutions that will have great impact”

Scottish fintech sector leading the way

Looking ahead, Anderson believes the Scottish fintech sector will play a key role in supporting economic recovery and sparking a new wave of innovation in the UK’s £173bn financial services sector.

Earlier this year FinTech Scotland launched its Research & Innovation Roadmap, outlining key areas of focus for the sector across the next decade. And the cluster organisation has bold ambitions for the future of the ecosystem.

The roadmap outlined goals to create more than 20,000 jobs over the next 10 years and increase economic value (GVA) from £598 million to more than £2 billion across the same period.

A key focus of this roadmap, Anderson explains, centres around fostering a culture of responsible innovation with regulatory compliance at its core. Long-term, she says this will not only boost appeal among consumers, but create a sustainable environment in which entrepreneurs and startups can build products responsibly and with people in mind.

“The importance of responsible innovation is huge, because in the long run that helps lead to the adoption of innovative new technologies, products and services, in turn creating jobs and economic opportunities.”

The roadmap also seeks to encourage the development of collaborative, cross-sector relationships – bringing together industry, the public sector and academia to “unlock” the capabilities of Britain’s research community.

Indeed, the roadmap acknowledges that Scotland has “one of the highest rates of world-class universities per capita” in the world, adding that Scottish universities are “leading the way in technology research and innovation”.

Harnessing this wealth of institutional talent will be a key driver of future fintech success in Scotland.

Since the publication of the roadmap, Anderson says there have already been some notable examples of responsible innovation coming out of the scene and creating tangible, real-world impact.

Incumbent financial services institutions, of which Scotland has no shortage, are also recognising this and making huge efforts to partner with fintech entrepreneurs to capitalise on the innovation culture woven throughout the ecosystem.

“It’s this kind of collaborative approach that’s helping create better outcomes for people and driving innovation across the fintech and financial services sector here in Scotland. It’s allowing us to support some of the hardest-hit people during this cost-of-living crisis,” she says.

Cluster Excellence

In recent months, there have been a number of “exciting” moments for the Scottish fintech sector, Anderson says. Perhaps most notable of these has been recognition with a cluster excellence award.

The European Secretariat for Cluster Accreditation (ESCA) confirmed the award following an extensive audit of the organisation’s progress and delivery record since January 2020.

In particular, the ESCA highlighted a number of key improvements, including a 22% year-on-year growth in the number of fintech SMEs operating in the ecosystem.

The award also hailed the cluster’s exemplary leadership and the growing culture of collaboration between fintech companies, large enterprises, universities and public sector bodies throughout the UK.

Anderson believes the award represents “absolute validation” for the ecosystem, showcases its potential and will act as a means by which to measure performance with other clusters in the UK and further afield.

“I have to give full credit to everybody involved in the FinTech Scotland cluster for this. Because it’s great validation to the approach that we are taking to building fintech innovation,” she says.

“This will give us the ability to benchmark ourselves against other cluster organisations. It’s vital for us moving forward and keeps us focused on the key activities that will help us achieve success.

“So it’s a real testament to all of the committed, action-orientated participation across the cluster that we’ve achieved this.”

Setting an Example

In addition to acting as a seal of approval, the recent excellence award will show that Scotland’s fintech ecosystem is an attractive place to do business for organisations from across the UK and further afield.

Furthermore, it adds to its credentials as a regional leader in the UK’s burgeoning sector. Recent statistics from Tech Nation show that investment in Britain’s fintech industry reached an all-time high in Q1 this year.

And since January 2022, the sector has already attracted $9.3bn in funding, marking an increase from $8.67bn across the same period in 2021 and defying the economic downturn.

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At present, the volume of investment flowing into the Scottish fintech ecosystem is impressive, but still lags behind the London or South-East clusters. However, Anderson insists the Scottish sector can still lead by example and help set the tone for the future of the broader UK industry.

After all, the Kalifa Review highlighted the Scottish ecosystem and its approach to cluster development as “industry-leading”.

That’s why the cluster excellence award could prove so impactful in the long run. Anderson says FinTech Scotland views it as a springboard not only for sharpening its focus on the innovation roadmap, but as a collaborating partner for other regions to look to for advice or inspiration.

“The Kalifa Review, and also the award, highlight Scotland’s leading position in the UK fintech sector and the importance of what we are doing here,” she says.

“More than anything, it really demonstrates how important Scotland takes its responsibility as a leading cluster and will help us accelerate opportunities for the industry north of the border.

“That makes us an attractive proposition in both a regional and international perspective, so we can all be really, really proud of what the cluster is doing, and where it’s going,” she adds.

Scotland Fintech Festival – Get Involved

Our next conference is the Fintech Summit, held live and in-person at Edinburgh’s Dynamic Earth on 15th September.

The Summit will be held as the launch event of the Scotland Fintech Festival and is free to attend for people working for Financial Services or Fintech companies.

For information on the Scotland Fintech Festival, please visit: https://www.fintechscotland.com/scotland-fintech-festival/