Customers' needs are central to Scotland's ambitions

By John Devlin. David Goodbrand - Partner, Burness Paull, Daniel Broby - Strathclyde Business School, Director, Centre of Financial Innovation and Regulation, Loral Quinn - CEO and co-founder, Sustainably and Andrew Berry -Director, Deloitte.

That was one of the main conclusions of a panel discussion, How can fintech be a positive agent for social good? organised by The Scotsman at the University of Strathclyde.

Scotland wants to become a top five global hub in fintech, a combination of financial services and emerging technology.

Stephen Ingledew, chief executive of umbrella body Fintech Scotland, and the person who set the top five target, said: “Historically, financial services have excluded many of our citizens and it’s important that we take the opportunity presented by fintech to serve their financial needs.

“We also need to make the fintech community much more diverse to help serve a wider cross-section of society.

“I had a gut feeling when I took this job that there was a different approach in Scotland to what was happening in Europe.

“Fintech businesses here want to be commercial and sustainable, but are driven by a real sense of social purpose.

“It’s not just about reinventing financial services to be slightly better, it’s reaching out and being much more relevant to a more diverse society.”

“Fintech is part of Scotland’s future – an open, international, inclusive and diverse future.

“The desire to do social good and to embrace diversity can really differentiate Scotland and give us a competitive advantage in fintech.”

Louise Smith, head of transformation at RBS and one of Scotland’s fintech envoys, said: “Innovation in financial services is not new – what’s new is how fintech companies are starting to use this disruptive technology to reimagine the industry. Combine that with customer demand – Know Me, Keep Me Safe, Let Me Live Well – and we really have an opportunity to change things.

“We need to understand that it’s all about the customer. Look how consumers react when their data is misused.

“It’s not about doing things from a social purpose perspective [in itself], it’s not a choice – we have to do it because it’s what the customer demands.

“This is a leadership and behavioural challenge, not a technological one. Get back to what the customer wants – nobody wants to talk about a mortgage, they just want a nice home.”

Smith said there were huge opportunities for fintech to have a positive global impact: “There are 3.5 billion people in the world who are unbanked or under-banked and we don’t have all the answers yet – but technology, customer demand and partnership working is driving change. It’s about doing the right thing.”

Smith expects more partnerships like the one between RBS and FreeAgent, a cloud-based accounting software provider.

“We need to partner effectively. The new fintech businesses can provide the innovation and technology, the banks provide the customer base – and combining them can do something really interesting.”

Leading fintech academic, Dr Daniel Broby of Strathclyde University, used a stark example to show how fintech’s desire to make financial transactions faster, simpler, cheaper and more transparent could make a real difference to the developing world.

He said: “Europe remits €150 bn annually to Africa from migrant workers – money sent back to some of the world’s poorest countries.

“The average transaction cost is about 8 per cent, so we are taking about €12bn from some of the poorest people in the world because the banking system cannot securely transmit from A to B without a middle man taking a cut. That’s something we can solve.”

There was also discussion about how biometric recognition could help people who are not financially literate – or illiterate in the widest sense – to access financial services.

Andrew Berry, a director at Deloitte, said fintech had real potential to deliver a “hyper-personal” approach: “Banking has always been seen as a bit boring, but now you can open up an account with a selfie and it’s much sexier.”

Berry also highlighted the opportunity for bots to explain complex terms and conditions in a much simpler way and for artificial intelligence (AI) to identify signs of emerging financial distress in customer dealings with banks.

“A call centre cannot always interpret and understand what a customer is saying, but AI has a better chance of identifying repeated phrases or speech patterns which show the potential for emerging distress.”

Alison McHugh, chief executive of Adlantic and co-founder of Gigly, described the customers’ desire for simplicity as “a race to convenience” – whether that meant using Facebook on their phone or biometrics, or both.

The panellists agreed that the design of fintech services was highly significant in delivering a positive customer experience.

“It’s fundamental; you are dealing with customers you never see because they are interacting with a voice or a screen,” Smith said.

Loral Quinn, of fintech business Sustainably, agreed: “Design thinking is key to it all – tech companies have a huge opportunity to use design to build deeper relationships and consumer trust. I think trust and security are now expected by customers – they want a great service that provides them with a solution to a problem.”

David Goodbrand, a partner with Burness Paull, said: “Trust and confidence is absolutely critical for fintech.

“New data protection regulations are helping with transparency and openness and open banking creates a whole new range of opportunities, empowering the consumer by using data to give them much better information.

“However, we all have a responsibility to make things simpler and more understandable for customers.”

Goodbrand accepted that fintech was still likely to suffer security breaches and Broby agreed: “We must not get too over-excited. Doing more stuff over the internet makes us susceptible to security breaches.

“We need to do more to secure our data – but there has been no financial innovation that has not been stress-tested by scandal.”

Broby also warned of the threat to existing jobs presented by fintech and McHugh said it had been estimated that 800 million jobs could be taken by robots.

However, Broby told the audience: “There were great job losses in the agrarian and industrial revolutions but also job creation. We need to understand what the new jobs are and what skills people will need.”

Ingledew said: “We have to focus on people and on real human needs. Don’t obsess too much about the tech side or the relevance of what you are doing can be lost.

“We need to tap into the educational and cultural shift – it’s not just about the finance and the technology, it’s much deeper.”

Motivation lies in having a positive impact

Two fintech entrepreneurs described their motivation in establishing new businesses which can deliver social benefit.

Alison McHugh, co-founder of Gigly, described how the business aims to match workers in the “gig economy” with appropriate jobs and training – and to help them navigate the job market and access appropriate financial products.

“The skills we need for the future are changing and [we need to look at] what happens when a job for life becomes a job for a day,” she said.

Gigly is involved in the UK Government’s Rent Recognition Challenge, which aims to help renters boost their credit scores based on real information about their current circumstances. “We are working as part of a collective to help more vulnerable people get onto the property ladder,” she said.

McHugh also highlighted the work of Glasgow-based Castlight Financial, which has a mission to deliver “a safer financial world”.

Its work is based on using rich data to make realistic decisions about affordability of credit - without demonising people for being in debt.

“This is important work because debt is very closely linked to poor mental health,” said McHugh.

Loral Quinn of charity giving business Sustainably, said: “We are a fintech for social good and everything we do is about having a really positive impact.

“We want to make doing good ‘frictionless’: the Über of philanthropy. You connect a card to Sustainably and every time you buy something, we round it up the transaction and give it to causes that you care about.

“Fintech can help those who have to give to those who have not.”

Sustainably is already working with Monzo bank and in discussions with many others, Quinn said.

Quinn said it was important for Sustainably that they recruited people “aligned with their mission and vision” but who also had an entrepreneurial mindset.

She thought that some potential investors in fintech were interested in the social impact of the business, while others were just looking for high returns.

“It’s been a difficult journey in terms of funding, but I have spoken to other tech businesses not focused on social impact and it’s been hard for them too,” said Quinn.

McHugh agreed: “You have to work really, really hard but there is support out there.”