According to recent figures published by Innovate Finance, global investment in fintech has rocketed from $930m in 2008 to $12.5bn in 2015, with recognised tech clusters such as Edinburgh supporting London’s global dominance.
Fintech is, to coin a phrase, white hot right now. It’s not only empowering new start-ups with the ability to launch disruptive technologies into parts of the banking business, but also helping banks to meet customers’ expectations of ever more accessible services.
Mobile payments, both app and browser-based, are driving the growth of ecommerce. A new financial epoch is dawning, driven by a mobile-first approach to financial transactions.
The rise of the smartphone
Smartphones have transformed customers’ behaviours and expectations. Whether it’s checking your bank account online, or applying for a new mortgage, people expect – even demand – to be able to handle their financial affairs as easily as their social media interactions.
According to Adyen, the global payments technology company, 34% of browser-based online transactions globally are now made on a mobile device. Among individual markets, the UK continues to lead the world in mobile payment adoption, with 49% of online transactions on a mobile device (a figure increasingly dominated by smartphones).
This revolution in how we, as customers, manage our transactions and interact with financial institutions has major implications for cyber security. High profile data thefts continue to make the headlines, leaving many people concerned about the security and privacy of their personal information.
Identity fraud was estimated to have affected 3.25 million people in 2015, totaling £5.4bn.
How safe is your data?
Edinburgh fintech start-up Payfont is at the forefront of combating hackers and the malicious theft of personal data. The business was recently valued at £180m by intellectual property valuation experts Inngot.
Founder and chief executive David Lanc heads the four-year-old business. As a former senior executive at Royal Bank of Scotland’s cards business, he helped to bring chip and pin and Internet security to the UK.
As an alternative to vulnerable password-based authentication systems, Payfont helps banking customers personalise how they want to identify themselves online, while its proprietary ADeCA technology represents a quantum leap in security by effectively turning personal data into “online sand’. This makes it virtually impossible for would-be criminals to turn personal information back into meaningful information.
Personal finances made easy
Launched in 2010, another Edinburgh business epitomises how technology can be used to meet customers’ shifting expectations. Money Dashboard has built the UK’s leading personal financial data platform, which gives more than 100,000 UK customers a true view of their financial lives.
“We securely pull in data from any UK bank account. This allows consumers to get a holistic overview, with spending categorised, so they can see how much they're spending on groceries, public transport, entertainment and so on. It allows people to get on top of their finances and ultimately achieve their financial goals,” explains Steve Tigar, chief executive officer.
“We believe an independent personal financial management service has the potential to attract a user base of multiple millions in the UK alone. The catalyst for this will be the forthcoming Open API, meaning that, with the customer’s consent, banks will be able to send a direct data feed to trusted third party developers.”
Developing tomorrow’s services
Money Dashboard moved its HQ to Edinburgh in 2013, to gain access to the city’s impressive talent pool. In fact, securing talent remains a common theme shared by many fintech businesses attracted to Edinburgh.
In the latest Tech Nation 2016 report, one in three digital technology businesses source talent from local universities. Every year, Edinburgh’s universities produce an impressive 1,200 highly skilled computing and software graduates – a significant cohort to support digital start-ups, further supported through dedicated incubation centres.
As the second largest financial centre in the UK, Edinburgh also has an enormous presence in the world of global finance.
No wonder the city’s fintech sector already has its stars. Companies such as FreeAgent, miiCard, Payfont and Money Dashboard, have all secured recent investment and are expanding rapidly.
A growing reputation as one of the UK’s most vibrant, innovative and dynamic tech clusters is also helping to forge and reinforce a real sense of community across the city.
Helping to nurture this vision is StartEDIN, a membership-led, non-profit organisation brought together and supported by a blend of established companies, start-ups and digital entrepreneurs. StartEDIN offers members regular networking opportunities, a key benefit cited by 87% of tech businesses in Edinburgh in the 2016 Tech Nation report. In fact, more than 2,630 people regularly attend technology meet-ups in the city, with Edinburgh businesses more likely to take advantage of local business and technical support than anywhere else in the UK.
“We have long talked about building an entrepreneurial ecosystem in Edinburgh. I truly believe it now exists and it's flourishing; whether that's unicorn businesses like Skyscanner or the fintech stars of tomorrow,” adds Steve. “I firmly believe the best is yet to come.”