Scotland in 2050: Financial Services - Financial Innovation for the Future
The Scottish financial sector has always punched above its weight due, in large part, to its appetite for innovation and sharp business acumen, which it has successfully exported around the globe.
The successful early establishment in Scotland of current account banking and the investment trust speak to this, along with the undisputed influence of the Scottish diaspora, which established many of the great financial institutions from Paris to Hong Kong.
This impressive pedigree has contributed to the ongoing strength of the Scottish banks, insurers and fund managers, and the large contribution they make to the Scottish economy, bolstered in turn by the growing number of overseas financial sector businesses that have located in Scotland, and the blossoming here of new financial businesses based around emerging technologies.
All of this puts the Scottish financial sector in a strong position to address the challenges and make the most of the opportunities ahead.
While Brexit is likely to have a significant impact over the next few years, it is important also to look further into the future for the Scottish financial sector. With this in mind, and as part of our 250th anniversary, Shepherd and Wedderburn commissioned the Fraser of Allander Institute to produce its initial report Scotland in 2050: Realising Our Global Potential, with a view to stimulating discussion and developing policy to create an outward looking economy fit for the future.
Several of the longer term trends identified in the Fraser of Allander Report are of particular relevance to the Scottish financial sector, namely:
• accelerating technological change and automation;
• accelerating growth and sophistication of the emerging leading economies of Asia, South America and Africa; and
• the economic impact from climate change and the transition to low carbon economies.
The financial sector is already alive to these trends. Institutions and new and growing businesses are focusing on financial technology (fintech) separately and co-operatively, with further fintech capacity moving to Scotland.
In turn, Scottish Financial Enterprise, FinTech Scotland and other bodies are helping to develop the environment for future fintech development and growth, which, alongside the internationally recognised strength of Scottish universities in informatics and other leading edge technologies, will underpin ongoing practical innovation in fintech and help to train the innovators required to work in the sector.
Similarly, Scottish universities and businesses have existing strengths in renewable energy and other fields of significance to climate change. Likewise, the Scottish financial sector is already heavily involved in funding wind and other established and emerging renewable energy technologies, building on the financing structures developed over decades of North Sea financing and other financing innovation.
The emerging economies mentioned in the Fraser of Allander Report are potentially lucrative markets for fintech and climate change-related financing between now and 2050. However, the report also notes the relatively low penetration of Scottish businesses into those markets currently.
This presents both challenges and opportunities - and when exporting financial services, regulatory barriers in foreign markets can pose specific problems.
Scottish regulatory and advisory expertise can clearly provide assistance in accessing those markets, and indeed in helping to develop less well developed foreign regulatory environments in line with growing global harmonisation of financial regulation.
Increasing dematerialisation and remote operation of financial services will also facilitate provision from Scotland of services in those foreign markets – and there are already a number of Scottish-based financial sector businesses operating in this way.
Competition for access to these markets, and the competitiveness of Scottish-based financial services businesses, will top the list of issues to be addressed, and here the market-leading reputation of Scottish education and finance must present some advantages, particularly when combined with the re-invigoration of the outward-looking spirit that previously made Scots pioneering world-leaders in financial services.
Link to article
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