Assessing demand for FinTech-specific collaboration and incubation space in Scotland

Ekosgen was commissioned in June 2018 to undertake a demand and needs assessment for physical collaboration and incubation space for the Scottish Financial Technology (FinTech) sector. The aim was to explore current provision for collaboration space within Scotland that could be used by eligible FinTech businesses, identifying any gaps in provision in terms of suitability for Scotland’s FinTech business base. The research then explored the demand for space and support by the FinTech sector, and the appetite for, and practicalities of, delivering FinTech-specific collaboration and incubation space with existing suppliers. Key to the work was assessing what approach would best fit the need in Scotland.

The methodology included desk research and consultation with FinTech SMEs, Financial Services incumbents, stakeholders and existing business support providers in order to explore current provision of space and business support and identify any gaps. The research was informed by three potential models for future delivery, as a starting point for investigation: franchise model; partner model; and strategic model. These models, and alternatives such as a ‘virtual’ FinTech hub underpinned by a range of digital and online collaboration tools, were tested with stakeholders, suppliers and FinTech companies.

The research found that there is already significant provision of incubation space that is suitable for FinTech start-ups in Scotland. This space is designed to meet the needs of the wider Digital Technology sector, as well as other sectors, rather than being FinTech-specific. However, there is a consensus that FinTech companies do not need incubation space that is tailored to their needs. Rather than office space, the key challenges for the sector include the articulation of Scotland’s FinTech USP, the co-ordination of the ecosystem and the targeting of support. There is a need for Scotland to identify a particular area of strength/specialism in order that Scottish FinTech can be marketed on the global stage. This will also be important for directing and tailoring support packages. Particular areas of business support identified as challenging include support for growth stage companies. The majority of Scotland’s FinTech companies are at this stage so a focus on growth and acceleration is needed to drive the sector forward. This requires more tailored FinTech-specific support around issues including regulation, business to business selling, introductions and relationship building with customers and investors and internationalisation. Though incubation space for start-ups, and office space for scale-up and growth companies is sufficient, there is an identified need and demand for a more strategic space and aligned support aimed at fostering collaboration between FinTech SMEs. In particular, there is a desire for a more open, neutral space where existing companies, including Financial Services incumbents are more visible. Such an environment also provides opportunities for FinTech SMEs and Financial Services incumbents to collaborate together and build more effective and equal relationships, and acts as a gateway for investors.

The report highlights some areas for further consideration for industry, including Scottish Enterprise, FinTech Scotland and partners: there is a clear rationale for a hub to be situated near to Scotland’s main FinTech cluster in Edinburgh, using the strategic model identified; ensuring access to support in other geographic areas in Scotland is important, which could be achieved with a FinTech presence delivered through either a franchise or partner model in Glasgow, Aberdeen and/or Dundee, taking into account the comparative advantages and disadvantages of each delivery model; taking advantage of the willingness of existing delivery partners to support the FinTech sector from current facilities could help to create an ecosystem of support space for a critical sector; there must be an offer of support particularly targeting FinTech companies, although this does not have to be exclusive to FinTech; and consideration should be given to the capacity for revenue generation through the hub.