​​Cluster management body, FinTech Scotland, is advancing the agendas set out in both the UK Fintech Sector Review and its own Research and Innovation Roadmap, aiming to drive economic growth and jobs in Scotland and in the UK more broadly.

FinTech Scotland has recently successfully secured UK Government funding to accelerate innovation in Scotland’s fintech cluster. This is part of the UK government’s launch announcement to catalyse high-potential growth clusters across the UK. Funds will go towards a new Financial Regulation Innovation Lab focusing on leveraging new technologies to accelerate efficiencies, revolutionise risk management and shape future regulatory developments.

Clusters: The whole is greater than the sum of the parts

Clusters are defined by HMT as ”a group of businesses in the same or similar sectors and institutions, benefitting from being either physically co-located or in close proximity to each other”. 

Recognised as powerful economic and social development tools, clusters empower innovation and show more resilience. According to the European Secretariat for Cluster Analysis (ESCA) clusters have been proven to:

• Cohesively connect participants in a particular field leading to faster growth when compared to  the mainstream economy;
• Respond faster to innovation opportunities;
• Employ more people, an average of 25% more by business and enterprises;
• Pay more, on average up to 11% higher salaries; and
• Gain international recognition and facilitate collaboration with centres of excellence.

Indeed, the Kalifa Review of UK Fintech recommended accelerating the development of fintech cluster excellence, including increasing research and development investment in fintech innovation. Analysis for the Review showed that highest growth clusters reveal a combination of core characteristics that serve as foundational building blocks for fintech success, including: a proximity to financial services and technology domain expertise; proximity to academia, and; proximity to accelerators and investment.

FinTech Scotland: A strategic cluster management body

FinTech Scotland was founded in early 2018 as a strategic cluster management body built upon the foundations of Scotland’s financial services heritage and innovation capabilities, as well as capitalising on the fact that Fintech will be a significant part of the digital evolution going forward.

Scotland is one of the largest FinTech clusters in the UK, with world class innovation and strong collaborations driving financial innovation nationally and around the world. Rather than simply representing a membership organisation, the FinTech Scotland cluster is supported by strategic partners across the financial services, technology domain, professional services, academia, regulators and government - representing a community of strategically committed participants that shares knowledge and supports each other’s development. Out of the 6 or 7 businesses that started out with FinTech Scotland in 2018, this has now grown to incorporate the commitment of 33 large institutions, and well over 220 fintechs.

Being accredited with the Silver label for Cluster Management Excellence by the ESCA clearly signifies that FinTech Scotland is hitting benchmark expectations to ensure the cluster is on track to drive economic output.

Roadmap: Advancing Economic Value across Scotland & UK

To further advance the FinTech Scotland cluster, a FinTech Research and Innovation Roadmap was developed last year to provide a pathway and action-oriented framework to increase the positive impact of fintech innovation across Scotland and the UK. This is underpinned by the strategic objective to create value through economic growth - to drive enterprise, creation, and productivity to support the growth of Scotland’s and the UK’s digital economy.

The Roadmap advances the FinTech Scotland cluster in a number of ways, including a collaboration that will focus on financial service’s greatest challenges by bringing the strength of the research community into the future of fintech innovation. It will also involve connecting cross-sector research and innovation with fintech futures helping us advance the digital economy and our net zero economy.

Since the Roadmap has been developed, fintech innovation has been evolving. Jobs have increased with the number of Scottish fintech SME firms increasing to 223, a 15% increase over the year, driven by both new fintech startups and international firms setting up in Scotland. There’s been a boost in investment with Scottish fintech firms receiving an increase of more than 200% raised in funding in 2022.

Fintech adoption has also accelerated, illustrated by the fact more partnerships have started between established institutions and emerging technologies developed by smaller fintechs. This fintech adoption is driving real impact and forging effective relationships across the cluster, leading to more idea creation and opportunities.

Roadmap driving responsible innovation

In terms of potential for the FinTech Scotland cluster, we are looking forward to seeing more of the businesses scale and export their services, as well as watching pipeline innovation grow - all in the name of responsible innovation.

The Roadmap gives an opportunity for innovators to really understand industry priorities. By answering an Industry Call with a clear challenge statement, fintechs can then develop a strong proposition that will be sure to meet industry demand. These Industry Calls are all about driving good economic outcomes, as well as driving good consumer outcomes for businesses and for people.

We hope to see these continue with Lloyds, Phoenix, TSB, and the cross-sector Financial Regulation Innovation Lab, as well as the Smart Data Foundry, with its ability to help innovation develop in an agile and cost effective way. We are also tremendously excited about the opportunity for translational research to really land within the industry, building on the fantastic strength of the UK’s academic community.

FinTech Scotland is just starting to realise the potential that it has to offer as we begin to think about advancing our digital economy. By combining industry innovation calls and the translation of research into industry and adopting innovation and technology with an eye to the future of the digital economy, we are aiming to create a financial services sector that will drive the good economic outcomes that we need, but will also progress financial inclusion initiatives.