Scotland’s financial sector needs to speed up its adoption of Financial Technology — or Fintech — to avoid a future banking crisis and to create jobs, according to experts at Strathclyde Business School.
Academics at the Strathclyde University’s Centre for Financial Regulation say Fintech has the potential to create nearly 15,000 jobs in Scotland over 10 years.
But failing to adopt leading-edge technologies would have the opposite effect, causing a loss of just over 14,000 jobs – or £635 million in wages, they said.
The warning came at a symposium that brought together Scotland’s bankers, fund managers and insurers at the University of Strathclyde’s Technology and Innovation Centre.
According to Scottish Financial Enterprise, the financial services industry in Scotland employs almost 100,000 people directly and around the same again indirectly, generates about £8 billion for the Scottish economy, manages £800 billion of funds and accounts for 24% of all UK employment in life assurance, and 13% of all UK banking employment.
“In Scottish bank and fund management operations, Fintech is already used,” said Daniel Broby, director of the Strathclyde University’s Centre for Financial Regulation and Innovation.
“This is, however, largely developed in-house and as such is not cutting edge.
“The gradual trend has been for traditional banks to move to off-the-shelf solutions and to leave the in-house developed legacy systems.
“We argue that this should be accelerated. There’s potentially a huge opportunity for Scotland but we need to seize it.”
The symposium heard that digitalisation of financial transactions has commercial and regulatory implications and it impacts all aspects of capital markets from transactions, settlements and fundraising.
Broby added: “Fintech is evolving at a rapid pace and the consequences of digitalisation are being hailed as a game changer for both the banking and securities industries.
“Financial transactions are set to become instantaneous, traditional paper money is being replaced by digital money, and entrepreneurs will be able to raise money directly from the public.
“All this is good news for the consumer.
“But it is critical that we create the right conditions to enable companies to develop Fintech faster, if Scotland’s financial sector is to remain globally competitive.
“The technology exists. Either Scottish financial institutions adopt it and thrive, or they ignore it at their peril.”
The conference heard that Fintech is being driven by two major innovations – blockchain, and distributed ledgers.
Blockchain will enable transactions over the internet and will allow online payments to be sent directly from one person to another without having to go through a financial institution.
Distributed ledgers have the potential to transform the way the financial sector handles identity, transactions and debt information.
Last year saw £10 billion invested in Fintech start-ups globally.
The conference also discussed:
- The potential for a Scottish crypto-currency
- Fintech and fund management: robo-advisors, crowdsourced products, crowd investing
- Fintech and capital markets