Masters Dissertation

The Fintech Revolution – A Contemporary Analysis of Technological Innovation in the Financial Services Sector, in the Context of Sme’s Operating in Scotland


Disruptive business models dominate today’s modern economic climate. As Uber reengineers the traditional taxi market and Airbnb sets to derail the traditional hotel market, this trend sees new challenger firms leveraging technological innovation to meet the changing needs of the modern consumer. This disruptive strategy is now finding a strong foothold within the already weakened financial services sector – with ‘Fintech’ start-ups attacking incumbents’ market shares and dwindling consumer bases.

A number of pertinent reports seek to map the Fintech phenomenon; however, by their own admission, this dynamic and evolving field requires continuous examination. Therefore, this research aims to provide a contemporary analysis of developments within the financial services sector. Further, this study is set in the context of SMEs operating in Scotland to fill a research gap and contribute to the existing body of knowledge.

To achieve this aim, four leading bodies within Fintech in Scotland were interviewed on a one-to-one basis. Discussions centred on five key areas, each seeking to answer five overarching research questions ultimately. Analytical techniques were adopted, eventually arriving at a number of emergent themes, each confirming or contracting literature or providing new insight into the sector.

A number of significant findings were revealed, most notably the future potential of data and API developments and the current lack of VC funding in this sub-sector. It was also highlighted that although certain macro and micro-economic factors dominate academic and practitioner reports, many failed to develop real significance during the discussions.

Such findings, therefore, contribute to the body of knowledge but are also of benefit to practitioners operating within this space and investors seeking to identify potential macro and micro changes in the environment.

Chapter 1 – Introduction

1.1 Purpose

The aim of this study is to analyse how technological innovation has reshaped the modern financial services sector, in the context of SME’s operating in Scotland. This chapter will introduce the overall content of this study, first providing a general setting of today’s financial services market, and a rationale for the study. This will then reveal the main research aim, and the underlying objectives which, if achieved, will accomplish the aim. This chapter will then conclude by outlining the overall structure this study will follow.

1.2 Context and Justification

Recent innovations in finance have redefined the way in which the world saves, borrows, invests, spends, and protects its money (Fasnacht, 2009). ‘Fintech’ – the combining force of finance and technology – is considered a revolutionary paradigm shift in the market, allowing technology-focused start-ups to disrupt or create new financial markets, leveraging technological advances to create superior products – better suited to the modern demographic (Marceux, 2014; Mackenzie, 2015; Kelly & Jones, 2016). According to a recent report by PricewaterhouseCoopers (PwC) (2016), it is estimated over 20% of existing financial services firms’ market shares are at risk to Fintech firms: a developing industry attracting investments of $18bn in 2016 (KPMG, 2016a).

These innovations come at a time when value in the eyes of the consumer is changing. With an estimated 2.9 billion people connected to the internet, the demand for interconnectivity is increasing, especially within the ever-dominant millennial generation (Marceux, 2014). Silicon Valley is ripe with start-ups disrupting a number of sectors aimed at better-serving millennials (Engel, 2015; Varian, 2016), with financial services (FS) start-ups attracting a high level of investment, moving focus away from traditional banking structures (Accenture, 2015a).

These ‘non-bank banks’ do not only stem from Silicon Valley – a number of key innovation hubs are evident globally (Chishti & Barberis, 2016). In Europe, for example, investment into Fintech firms has grown by 120%, with London emerging as a nerve centre, attracting $646 million of venture capital (VC) funding in the first quarter of 2015 (Accenture, 2015a; Mackenzie 2015).

The recent political turbulence has weakened Fintech investment in the UK (Levene, 2016). Still, nonetheless, recent reports do suggest that industries with a high level of innovation will develop ways to leverage these economic changes in their favour (Kelly & Jones, 2016). Although the focus is often towards London-based financial organisations, more than two-thirds of the 2.2 million finance sector employees are outside London (The City UK, 2016). In 2016, Scotland hosted 3,685 firms operating within this sector, employing 156,700 – an increase of 6,300 (4%) from the previous year (Scottish Government, 2016a).

Each of the ‘big four’ FS firms has sought to report on this fast-developing sector (Deloitte, 2016; E&Y, 2016; KPMG, 2016a; PwC, 2016) with a further number of reports set in a geographical context including areas such as; India (KPMG, 2016b); Korea (Lee & Kim, 2015); Africa (Arber, Barberis, & Buckley, 2016); and Switzerland (Stagars, 2016). To date, research into Fintech developments in the UK has primarily focused on London as a key finance hub (McKenzie, 2015; Shubber & Ahmed, 2016).

Despite this myriad of reports on Fintech, as noted by Chishti & Barberis (2016), this ever-expanding topic requires continued research, particularly as its disruptive strategy is still in the early stages. Indeed, a comparison from reports such as Accenture (2015) and Ito, Narula, & Ali (2017) highlights this topic’s dynamic and revolutionary nature.

This study aims to produce an analytical piece of contemporary research contributing to the existing body of knowledge. In order to fill a noticeable research gap, the study will be placed in the context of SMEs operating in Scotland. Applying this study in another geographical context provides scope for future geographic comparisons to similar developments outlined in other studies. As this study seeks to produce a more up-to-date analysis of the Fintech phenomenon, it is expected to have three main beneficiaries: academics seeking to gain further knowledge of the paradigm; practitioners looking to identify key market shifts and leverage emerging technologies; and investors, looking to gain further insight into developing macro and micro trends.

The underlying reason for the researcher choosing this particular topic is mostly due to the desire to increase knowledge and understanding – with this area directly associated with the researcher’s desired career path. This area was of interest due to its relation to four core modules covered in the MBA programme – finance, economics, innovation and strategy.

1.3 Research aim and objectives

The aim of this research is to analyse how technological innovation is reshaping the modern financial services landscape in the context of SMEs operating in Scotland.

In order to achieve this aim, five research objectives are noted:

– To critically examine the literature relating to macro and micro changes within the global financial sector, identifying key themes and challenge areas, ultimately leading to the production of a framework centred around research questions

– To develop this framework into a semi-structured interview strategy, with the intention of gaining insight from leading Fintech figures operating in Scotland

– To analyse the primary data, producing a thematic framework in relation to the overarching research questions

– To develop a discussion on key findings in the context of seminal literature, seeking to provide contemporary insight into Fintech

– To summarise and draw conclusions from findings, highlighting limitations and further areas for research in such an ever-expanding sector.

1.4 Approach to Research

In order to achieve the objectives and, therefore, the overall aim, a specific approach to the research will be later debated in detail, considering a number of possible methodologies and research methods. As this research seeks to provide a contemporary analysis of developments within the FS sector, the research’s main practical element will be conducting one-to-one interviews. Using open-ended questions, four interviews are conducted, with participants of CEO, Director, Specialist, and Senior Analyst level within their companies.

Then, through processes noted by Silverman (2010) and Bryman & Bell (2015), a number of qualitative analytical methods will allow for the primary data to be developed into a thematic framework. This will then lead to a discussion set against the existing literature, with the aim of contributing new insight into the Fintech paradigm.


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The Fintech Revolution - A Contemporary Analysis of Technological Innovation in the Financial Services Sector, in the Context of Sme’s Operating in Scotland