Fintech in pole position for data-driven innovation

While the Bitcoins of this world have been in the media spotlight, the impact of Fintech is more apparent in the way we are using smartphone apps to manage day-to-day finances. We spoke to Stephen Ingledew, CEO of trade body Fintech Scotland, to find out more.

Fintech is defined as any innovation in technology that supports financial services, from digital banking to financial inclusion programmes, as well as new areas like Bitcoin and other cryptocurrencies. Fintech allows businesses to engage more safely and effectively with customers, using digital channels. There are currently two main areas of Fintech innovation. The first involves businesses engaging with customers, as Stephen Ingledew, Chief Executive of Fintech Scotland, explains.

“This digital revolution, driven by the explosion in data collection, allows businesses to engage with more customers, more efficiently and more effectively,” says Ingledew. “Data allows companies to talk to customers at a personal level, speaking to them through digital channels as individuals, rather than through a mass approach.” Moving away from traditional ‘spray and pray’ marketing, sectors like retail and travel have personalised their offer, providing better services and building customer loyalty.

Big Data is watching you
The second area of Fintech innovation involves enhancing data analytics and insights with artificial intelligence (AI). For example, banks are exploring ways to cut costs and boost revenue using chatbots, investment algorithms, and even robo-advisors. You might walk into a branch one day and find yourself talking to an android, but Ingledew maintains that the growing use of AI promotes more – and better quality – human interaction.

“We are seeing new ways in which customers can raise issues without dealing with another human. But there are always more complex aspects of life where you’ll want to sit down with someone face-to-face. Better knowledge of the customer’s data will allow for better conversations to take place.”

The extent to which companies exploit users’ data – and how much those users know about it – has been under scrutiny recently. In Europe, the introduction of the General Data Protection Regulation (GDPR) is forcing consumers and companies alike to pay more attention to data governance. In Fintech, the emphasis is on making good governance a competitive advantage. Ingledew sees this happening among Fintech Scotland’s member organisations.

“The key here is that GDPR requires organisations to be smarter and more transparent. Therefore, they need to invest in data management and be clearer about its use. The requirement to obtain proactive consent from customers is a positive, because you’ve then got agreement for an ongoing dialogue. That’s going to be powerful for Fintech companies who embrace data-driven innovation.”

Forward Fintech Scotland
Despite having only taken charge at Fintech Scotland in January 2018, Ingledew is already steering the body along a clear path. His immediate priority is to focus on three challenges – growing the Fintech ecosystem, ensuring the supply of suitably skilled people, and providing support to Fintech companies at the various stages of their development.

“My first question is, how can I help the ecosystem of different players in financial services technology – especially big and small companies – work together to generate and develop opportunities? I want to see established financial services enterprises here in Scotland – the big banks, asset managers, and insurers – sitting down with new, entrepreneurial SMEs, potential disruptors who’ve got the ideas, the new ways of engaging with data. It’s a matter of bringing them closer, not to compete but to collaborate, because there’s plenty of scope for a win-win perspective. And there are already examples of that happening.”

Fintech Scotland was established through a partnership of Scottish government, Scottish Financial Enterprise – which represents the financial services industry – and the University of Edinburgh. Working with universities and colleges is an important part of the organisation’s remit, to ensure that the skills being developed are what the sector needs. Ingledew sees this as a vital aspect of nurturing the Fintech ecosystem, but argues that an even greater imperative is addressing the skills of people already in the workplace.

“Of course, it’s about the young people coming through from schools and further education colleges and universities, but there is a more urgent need. People in their thirties, forties, and fifties will need to re-train in digital technologies, the use of data, and working with analytics. It already affects almost every role. All workers, including executive-level business leaders, will need at least some training in order to embrace the opportunities on offer.”

There’s plenty of speculation about automation, and whether any jobs will be left for humans. At the same time, seductive new possibilities are being touted for the future of work – provided we can embrace technology and develop our data capabilities sufficiently. To do that, every workplace will need the right combination, and the right standard, of skills.

“Inevitably, that creates some anxiety, particularly for people at mid-career stage who need to significantly upgrade their skills. Whether you’re a chartered accountant, working in human resources, or an operations director, you will need a level of understanding of Fintech and its applications to benefit from the way it impacts your organisation and your customers.”

Ingledew’s third challenge is providing the right services to help Fintech enterprises at different stages of growth. This involves identifying funding, sorting out hiring and location, and finding appropriate business services from accountancy and legal to marketing and mentoring. Fintech Scotland has a role in enabling its members – and the Scottish Fintech sector as a whole – to access those services effectively and efficiently.

“If I get those three things right,” he reflects, “it will allow me to demonstrate that Scotland is a centre for Fintech development. I believe we can build that profile, not just in Scotland, but globally.”

Ready for DDI
Fintech Scotland is poised to help transform the whole financial services sector in partnership with DDI, the data-driven innovation programme led by the University of Edinburgh. But are Fintech workers and companies ready?

“First of all, what you’ve got with the University and its DDI programme is the core academic understanding, which is the foundation for successful data-driven projects. The key is to provide an environment for experimentation, whether virtual or physical, that allows organisations and people with ideas to develop projects together.”

Combining DDI with Fintech allows for more agile testing of new technology. “We don’t necessarily know how best to provide better delivery to customers. Therefore, we have to experiment, and DDI allows that. We’re also keen to learn from other sectors who are already doing this,” he adds, “and there are plenty of opportunities to do so.”

In particular, he’s looking to DDI to provide the setting for what he calls “the Fintech factory”, a concept in which academics bring their know-how, industry people bring business problem statements, and tech companies provide the support services. Blending this spread of skills and knowledge creates an opportunity for Scotland to ‘manufacture’ innovation. Fintech Scotland acts as a broker, facilitating interaction and helping to bring the resulting ideas and partnerships to life.

“Rolling out that model of the Fintech factory across Scotland could be hugely powerful. It can gain global recognition, attracting foreign direct investment and encouraging other businesses to locate their operations in Scotland.”

Ready for tomorrow
As a keen runner, Ingledew can tell a sprint from a marathon. Fintech Scotland, he observes, is in a marathon where they may never get to the finish. “Eventually, I’ll have to pass on the baton,” he acknowledges. “It’s a marathon, but it’s also a relay.” So where does he see Fintech Scotland after the first 26.2 miles?

“I’m looking two years ahead with the plan we’re putting together for government and the financial services sector. We want to show what we can realistically achieve over that time, and how it will be delivered. We know that we’re not going to build Rome in a day, it will be done in stages.”

The ‘how’ involves working with strategic partners, not just established and up-and-coming financial businesses in Scotland, but also partners from outside the sector and outside the country. There are marketing and design agencies, professional services, and legal firms who can contribute both local involvement and global networks.

“Financial services are no longer in a silo,” says Ingledew. “We learn by engaging with creative industries, life sciences, the public sector. That’s a fascinating part of my role, breaking down boundaries that have held back financial services in the past.”

Ultimately, Fintech Scotland’s ambition is to create economic growth and jobs, and Ingledew is determined to do it in a collaborative and inclusive way. “This isn’t just about the few,” he insists, “this is about all parts of the sector, big and small, working together, so that everybody in society can benefit from new technologies. Otherwise, we won’t have achieved our ambition. It will take innovation, collaboration, and inclusion – and you won’t get one without the others.”