From the days when Clydeside rattled with the roar of shipbuilding to oil and steel manufacturing, engineering and medical breakthroughs, brewing, textiles and agriculture, Scottish industry and skills have led the way.
Meeting the challenges that each industry brings, evolving to meet fresh demands and carving a successful reputation as a world leader – whether in distilling or banking, jute, journalism or Dolly the Sheep – Scotland has consistently punched above its weight.
Of course,some of those traditional industries have struggled – indeed, failed – to stand the test of time. Modern methods, new demands, fresh markets have emerged and suddenly new skills have to be learned.
Now the “fourth industrial revolution” is making its presence felt, transforming industries with new digital breakthroughs and creating waves of disruption in its wake.
Its presence is being felt nowhere more strongly than in the finance sector, where traditional banking methods and financial processes are being revolutionised by technology, making transactions simpler, creating a smoother flow of highly sensitive information and potentially putting thousands of jobs at risk.
Moving swiftly now to ensure Scotland meets the demands of yet another industrial challenge is crucial, says Daniel Broby, director of the Centre for Financial Regulation and Innovation (CeFRI) at the University of Strathclyde.
And failing to respond to the evolving needs of the modern fintech revolution now means being left behind.
“Fintech is a global phenomenon,” he says. “Jobs will be lost across the board anyway, but the first movers will be the ones that win the new jobs.
“So we are trying to bring to Scotland a capacity to effectively reinvent itself in a way that the financial service sector is having to reinvent.”
It’s why the university has recently become the first in the UK to launch an MSc course in financial technology, merging the technical and digital processing skills offered by other courses with an understanding of the financial sector and markets.
It’s also why the CeFRI was established last year, bringing together academics, policymakers, regulators and key figures from the financial industry to share ideas, research and help provide a solid foundation for a new financial services industry.
Based in Strathclyde Business School’s department of accounting and finance, it acts as a hub for information and research linked to the rapidly evolving fintech sector, with a view to not just helping meet the challenges it brings today but laying down the groundwork for what will come in the future.
And the future, according to Broby, will certainly be different. Blockchain is the shared database technology which helped launch the virtual currency bitcoin.
Exceptionally accurate and secure, it is now being adopted by financial institutions keen to make transactions flow easier and cut down costs.
“We are talking about making financial transactions over the internet faster and more secure and cheaper than anything that currently exists in the finance and insurance world,” adds Broby.
“Blockchain means it’s now secure to send digital data over the internet. So what does this mean for the financial world?
“It means the entire banking infrastructure is being rebuilt.
“If you think of it taking three days to clear a cheque or the time and money needed to send money abroad, it’s seems quite archaic – it should be instant.”
For the man on the street there will be the benefit of instant loan approvals and instant credit risk assessments of businesses; it will reduce the cost of transactions and provide an automated trail that is a permanent record.
“For business, it will mean that important Know Your Customer checks can be carried out instantly,” adds Broby.
“Businesses can share records without placing anyone’s identity at risk. And it can enable the digital transfer of assets, can transfer houses.
“Having solved this problem, change should come about fairly quickly. But that will have a big impact on our banking jobs,” he adds.
“Scotland – particularly Glasgow – has a very large outsourced banking sector, we do a lot of overseas work and clearing of transactions. People in those jobs will have to be retrained or they will disappear.”
The CeFRI aim is to place itself at the heart of the fintech movement, helping to guide policymakers and key industry figures with top-level research and studies, and educating a new breed of student armed with the vital combination of financial and technology skills to help drive the industry in Scotland forward.
But while Skills Development Scotland’s digital strategy is seeing some secondary school pupils being given the opportunity to learn programming – a key requirement along with raw maths for anyone entering
the fintech sector – Broby believes more work needs to be done at higher level.
“At university level people are coming out having been trained in traditional finance that’s been around for 50 years.
“Students are not being taught how to apply this stuff – and that’s where the weakness is.”
He adds: “If everything is done right, over ten years we’re likely to see the creation of about 15,000 jobs in fintech – direct and indirect positions.
“The problem with that, however, is if you get it wrong and do nothing you can potentially lose the same number of jobs.” There is so much at stake that First Minister Nicola Sturgeon is co-chair of the fintech steering committee, showing top-level commitment to getting the strategy right.
“Scottish Financial Enterprise do an extremely good job at bringing financial leaders around the table,” he says.
“That’s an advantage Scotland has, we are small enough to get these people around the table so when they hear their industry is about to change the decision-makers are in the room. It’s a real competitive advantage.”
The CeFRI is also at the forefront when it comes to ground-breaking research, showcasing its skills to the fintech arena so Scotland can be seen as being ahead of the game.
Its work with the National Physical Laboratory, think tank Z/Yen and the Toronto Stock Exchange has tested the importance of time-stamping blockchains as they carry out their transactions to atomic clock accuracy.
And the Strath Coin has been created for testing on the university’s own distributed ledger testbed.
New technology brings new need for fresh regulation too, another focus for CeFRI.
“We need to not use the same regulatory framework for things that are faster and more difficult to understand.
“As academics, we are pushing the new regulatory framework in the right direction so it doesn’t have holes in it – because whenever the financial sector has a loophole, people rush right through.
“Fintech is evolving rapidly. It’s important that Scotland doesn’t get left behind.”
Strategic link with industry
Established in 2016, the Centre for Financial Regulation and Innovation (CeFRI) at Strathclyde Business School aims to provide a strategic link between academia, policy-makers, regulators and other key players in the financial industry.
Its mission is to foster policy-relevant research to support the practical application of innovation in finance.
CeFRI promotes insights in innovation, market efficiency, risk management, investment benchmarks and corporate governance to a wider audience by organising a range of events from high-profile guests lectures to seminars and conferences.
Collaboration is key; CeFRI works closely with other centres and institutes across Strathclyde University with a focus on law, innovation and entrepreneurship as well as external businesses, professional, public sector and commercial organisations.
In addition, CeFRI operates as a hub of excellence in PhD and postgraduate teaching programmes in financial markets.
Its 12-month MSc programme in fintech looks at the use of technology to make financial transactions more efficient.
Delivered jointly by the departments of accounting and finance, and management science, the course will equip students with a solid understanding of finance, accounting, business information systems and analytic methods and prepares them for an exciting career in fintech. n
For further details visit www.strath.ac.uk/business