Riding the wave of the fintech revolution

Disruption ahead but fintech revolution can create new jobs (Image: Shutterstock)

ANY technological revolution or industrial change brings with it an element of fear for workers. When the Luddites smashed up weaving machines in the 19th century, they did it out of fear for their livelihoods. And for a crash course in how Scotland has felt the ill effects of the winds of change in industry, you only need to hear the closing refrain of The Proclaimers’ song “Letter From America”.

Of course, as Scotland’s heavy industry has waned, its financial service sectors have blossomed – but could rapid advances in fintech and artificial intelligence mean there’s a threat of Edinburgh’s financial sector joining the likes of Linwood and Bathgate on the Reid twins’ “no more” list?

There’s no denying that fintech will affect jobs in the financial sector. Mobile banking, for example, means staff in branches are dealing with fewer walk-in customers. And an anticipated wave of new services and apps making it easier for us to choose and change the likes of mortgages, insurance and pensions will also have an effect.

But Kent Mackenzie, a director at Deloitte’s Risk Advisory practice in Edinburgh, predicts that this effect will – on the whole – likely be positive. “In America they call it ‘skills elevation’, where actually you free up time and so are able to spend more time thinking about the other elements of financial services,” he says.“The Industrial Revolution changed the face of the workforce but it didn’t mean we all then just sat at home and watched Countdown,” he adds.

And as Mackenzie points out, the fintech revolution isn’t even the first time that a development in computing has given cause for concern in some quarters. “We all thought when dotcom came along: ‘My goodness, we’ll be doing everything on the internet!’ It has changed the face of the workforce but it hasn’t meant that hundreds of thousands of people have become unemployed.”

Alan Nelson, partner and IT and information legal specialist at law firm CMS in Glasgow, has a similarly optimistic view – fintech will create employment, he says. “It is easy to say that branches will close and people will lose jobs but that is a negative picture and too simplistic. Instead look at the positive: what we will see is the emergence of new and exciting careers: for example in data analytics and the continual need to improve the user experience for those using technology.”

And Nelson believes that Scotland has all the ingredients in place to make the most of the rapid advance of fintech, rather than be damaged by it. “That is what is exciting for Scotland – we have world-leading financial services institutions, a stable workforce and fantastic experience in data science,” he explains. “Combining those skills and experience successfully should ensure that Scotland can ride the fintech wave.”

In terms of having confidence in Edinburgh’s ability to ride that wave, few people have put as much money where their mouth is as Francisco Fernandez, chief executive of Swiss firm Avaloq. The $1 billion-valued “unicorn” company – which creates banking software used by the likes of Royal Bank of Scotland, HSBC and Barclays – doubled the floorspace of its Tanfield research and development hub in 2015, and has long-term plans to boost its workforce in the capital to 500.

Fernandez believes that existing firms which embrace new fintech technologies will thrive. “A large part of Avaloq’s success is a result of collaboration and exchange of expertise – and that’s where it gets exciting. Those businesses that see fintech not as something to ward off, rather to embrace it as a route by which to improve or expand their own offering, are ones that will stand to gain the most from fintech innovation now and in the long term,” he says.

He believes the diversity and competition injected into Edinburgh’s financial sector by developments in fintech will serve it well rather than harm it. “Much of the success we’re seeing in the more established fintech hubs, such as Frankfurt and London, is down to the choice new platforms offer consumers and businesses alike – and I believe we will see the same in Edinburgh,” he explains.

“The emergence of new technologies will help increase the breadth and capabilities of the local financial services architecture, and the successes of new platforms will force existing players to up their game to stay competitive – which can only be a good thing.”