Winning mix of start-up vim and big bank rigour

David Lee meets the Scottish R&D chief of a market leader in financial software who believes his firm has got the cultural balance just right

Combining the vibrant culture of a tech start-up with the rigour of a large business is a tough balance to achieve, but Mark Doherty believes Avaloq has pulled it off.

Avaloq, a leader in digital and core banking software and of software as a service solutions, has been based in Edinburgh for six years and employs more than 100 people at its development and innovation centre.

Doherty, who became managing director and head of the development centre in March, says: “Graduates and professionals alike are joining us because they do not want to work for traditional financial services giants where they are treated as a cog in the machine.

“We work hard to retain our start-up culture, even though we are now a large global fintech.

“In Edinburgh, we have multiple teams with staff from many disciplines and backgrounds.

“They approach challenges together, collaborating across teams and with other colleagues around the world.

“Since starting with us, many of our people have become close friends which only strengthens the working bond between them.”

Avaloq is “proud to be a founding partner of FinTech Scotland and we are working with them to promote Scotland as a growing fintech hub for data-driven innovation”, Doherty says.

The firm benefits from the “rich talent pool” in Edinburgh and Scotland, but works hard to recruit the cream of the crop.

“We have benefited from being one of the first fintech companies here in Scotland and from solid growth over the past six years,” says Doherty.

“As a stable fintech, we can attract the best talent available, and that talent pool is uniquely available here in Scotland.

“We speak to graduates on a one-to-one basis and spend time with each candidate to ensure we get the best fit for all of us.

“We have built online tools to help us get to the right applicants and use university networking and outreach programmes to help us connect with the right talent.

“For new team members, we try to build a more personal relationship, even during interviews.

“When they start with us, everyone is assigned a buddy and given as much training as they need.”

Doherty praises the city’s three universities, saying that Edinburgh, Heriot-Watt and Napier have “a pretty unique understanding” of what the industry needs.

He stresses the importance of a strong workforce: “We don’t want to recruit just ‘smart people’ that pass academic tests – we need a diverse mix of people and personalities.

“We have more women than ever taking up roles at Avaloq, which is a really positive sign.

“The team are a rich mix of nationalities and backgrounds and that’s a unique bonus of being here in Scotland – and we’re hiring!”

Doherty, who has been recruited to take Avaloq’s R&D centre “to the next stage of its evolution”, says the firm works on “the more complicated side of financial software”.

He adds: “We are creating software and services for not only retail banking, but also private banking and wealth management clients too. The challenges here can be very different to a typical financial institution, given the customers that we serve.”

Doherty describes some of the complex challenges being tackled by Avaloq’s Edinburgh team: “For one of our projects, we are building a capital gains tax service aligned with local tax regulations.

“Our customers need our banking platform to simplify their organisation and reduce the cost of regulatory changes.

“Avaloq services enable banks to operate across multiple jurisdictions, for example, adapting for regulations in Germany, UK and Spain.

“We also build integration tools and API [application programming interface] frameworks used by our developer ecosystem.

“The other side of the business is the digital team, which builds online banking and payments services.

“We have a loyal and engaged team because we can offer this variety of challenging work.

“Like all companies, we also need to get the basics right – when we asked staff this year what they liked about Avaloq, they said they loved the workplace environment, so we’re now investing in that to make it even better.”

Doherty says it is not just graduates who are attracted by Avaloq’s start-up culture – he was too: “I worked at Adobe, Fiserv and RBS. I wouldn’t have come to Avaloq if it hadn’t had that start-up culture; it’s part of the attraction for everybody.

“Some recruits tell us they have been to our competitors’ offices and that they find it demotivating, slow- moving and just dull.

“They want that start-up vibrancy but also the level of job security, maturity and expertise Avaloq can provide.”

Doherty was impressed by fintech’s progress on returning to Scotland (he studied software engineering at Napier University before working in London and the United States).

“You only have to look around you to see that a strong fintech ecosystem exists,” he says. “There is the great financial service heritage and the world-class universities, which have unique capability and competency in the local business environment.

“They also know it is not just about graduates, but an army of professionals who are constantly learning.

“Another key thing about being based in Edinburgh is having that UK corridor to London, to ensure we serve our entire UK customer base.

“Rather than parking every fintech in London, many companies like HSBC and the Prudential are basing new operations in Scotland.

“That gives them this great balance of access to talent and an excellent quality of life while also being cost-effective. It’s not just people that are more expensive in London, it’s everything.

“People love Edinburgh and the ecosystem in Scotland has every chance of succeeding as a data-driven fintech innovation hub.

“The big banks and pension and life assurance companies are here, along with the likes of Adobe, Amazon and Oracle, providing centres of gravity to attract and retain talent.”

When it comes to the big banks, does Doherty think they have grasped the full implications of the fintech revolution and are moving quickly enough to change their old processes and systems?

“It’s a difficult one to answer because Avaloq is here to help the large financial institutions with that transformation.

“It’s not just about them turning their technology around, it’s about keeping business processes going at the same time as they digitally transform.

“Many of them have tried to internalise those processes and do it all themselves rather than working with partners who have the experience and expertise.

“I think we will see more big companies relying on partners to help them on that transformation journey; they will get there.”

Doherty describes it as the “build or buy” option: “All the figures say that 70 per cent of transformation projects fail to achieve all of their goals.

“That figure doesn’t need to be so high. Staff at big banks are being kept awake at night worrying about running their older legacy IT systems.

“They might have hundreds of people working on keeping the lights on, rather than doing something to differentiate themselves from the competition.

“They’re now realising this, so more of these companies are moving towards a simpler way of delivering IT operations using BPaaS (business process as a service) and allowing their IT operations to be handled by experts. I think we will see a lot more of that.”

Unexpected gain from Article in The Scotsman

Avaloq is committed to engaging the very youngest talent in the opportunities and challenges presented by fintech – and that commitment has had an unexpected benefit.

Doherty explains: “One of our recent graduate recruits saw the article about Avaloq in The Scotsman’s fintech supplement last year and how we had marked our fifth anniversary by bringing five-year-olds into the office to explain about technology and finance in a practical way they could understand.

“She said she had read the article and knew she wanted to work here. She was studying maths and didn’t know about programming at all.

“She found her way to programming and joined Avaloq, who are committed to working with young people.”

He adds: “We can see that our teams overall are really motivated by the work they do in the local community.”

“We have challenged a dedicated ‘clan’ to look closely about what more we can do in the community.”

Doherty says there is still a big job to be done to embed STEM (science, technology, engineering and mathematics) skills in primary schools and that the absence of this makes it difficult further down the line.

“We need a fundamental change that starts earlier in schools,” he says.

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