Wales sets its sights on becoming a global fintech centre

Fintech Wales has put together a 10-year roadmap to make the country a global leader in the sector. So why does it think Wales is so well positioned to become a fintech leader?

Wales is setting its sights on becoming a global fintech centre. Led by the not-for-profit organisation Fintech Wales, a 10-year roadmap has been outlined to help establish the country as a leading player in financial services technology.

The country already has a strong technology sector, worth £8.5bn to the Welsh economy, and made up of 3,500 homegrown and multinational technology operations. 45,000 people are actively employed within Wales' digital economy, with tech hubs in Cardiff and Newport in the south, Swansea in the west and Wrexham in the north.

With Wales being home to three of the top five online insurance aggregators and well-known for its tech talent programmes, Gavin Powell saw the potential to take its fintech industry to the next level. Having originally worked in the aerospace sector, where he developed an ecosystem and environment to support innovation and growth, he was ready to take on a new challenge and became general secretary of Fintech Wales in March 2019.

"My background was at Airbus, where I did similar work for the aerospace sector. However, it had a more established ecosystem, working with universities, governments etc. Fintech isn't quite as well joined up, but I could see some real opportunities to make the Welsh fintech sector something great."


Why Wales?

Wales has a lot in its favour. The devolved government ensures proximity between business and policymakers, and is aligned with the goals of the sector.

"They support a lot; from trade deal talks through to inward investment and incentives, with regional funding," says Powell.

Welsh universities have begun to establish stronger links with the local fintech industry in recent years, and the country's relatively small size provides it with the agility required for fast-paced decision-making - particularly apt for the dynamic and ever-changing landscape of the fintech sector.

Furthermore, "compared to London and most other UK fintech hubs, Wales benefits from considerably lower costs of living, property and labour," notes Professor Arman Eshraghi, chair of finance and investment at Cardiff Business School. "This provides the right ingredients for fintech start-ups and scale-ups as well as established firms wanting to lower their costs ­- an inevitable choice in the current climate."

The country already benefits from fintech talent and experience, led by companies like Admiral Group, which started life in Cardiff and continues to have its headquarters there. Companies like this have helped to pave the way for other businesses looking to expand, relocate or launch in Wales, as the infrastructure and business support network is already in place.

"The willingness of the local community to work together has been a massive benefit to my business," says Sara West, CCO of regulatory compliance solutions provider W2. "Events such as Wales Tech Week, run by Fintech Wales, are a great opportunity for the sector to collaborate, and meeting with other companies and membership bodies means that start-ups and SMEs can thrive in the digital marketplace and use the local resources to grow exponentially."


Challenges ahead

Wales' fintech sector may have a lot going for it, but it's not immune to the challenges that affect the industry as a whole.

"Fintech companies in Wales will also face the same challenges as other financial services organisations, and customer servicing industries," says Emma Huntington, CEO of Admiral Pioneer - a new part of the Admiral Group with the objective of seeding, launching, and scaling new businesses. She goes on to highlight some of the challenges ahead.

"Fintech's still a young, relatively new industry that's continually growing and changing, which can present challenges for established businesses looking to adopt the technology retrospectively and start-ups alike. And transforming the finance industry is not an easy task.

"In addition, fintech companies are not only competing with large existing financial powerhouses, but also have to contend with consumer brands like Amazon and other technology companies expanding into financial services.

"Then the regulators face the problem of keeping up with the fast pace of technological change when deciding whether new fintech services need to be regulated or not, and if so, how. Fintechs also need to have stringent data protection measures in place from a legal perspective, but increasingly from a marketing and ethical stance too.

"There's also still much uncertainty about the impact of Brexit on the UK fintech industry, particularly potential new trade regulations, barriers for recruiting overseas talent and accessing capital from Europe."


Capitalising on the ‘new normal'

On top of all this, the industry has had to deal with the challenges that have come from COVID-19. However, one of the effects of the pandemic has been the acceleration of digital trends, and fintech is perfectly positioned to capitalise on the new ways we live, work and take care of our finances.

"The ‘new normal' will involve the need to survive digitally," says West. "Fintech start-ups and SMEs are proving that despite their size, they can satisfy this new need and adapt quickly to challenges and innovate to meet client needs.

"As we move to the future, the ability of the fintech sector to help businesses improve their processes will lead to a huge increase in efficiency and cost savings. For businesses with a more traditional working model, outsourcing or partnerships with fintech start-ups will aid them in taking a step in the right direction, to the new digital world."

Fintech will indeed have an important role to play in helping economies recover from the effects of the pandemic, and the benefits won't just be seen within finance. The sector can make a difference in a wide range of areas such as energy and transport.

"When people think of fintech they just assume it's tech that will help banks improve their apps. Although it is used in that way, it also offers so much more. Fintech allows business (of all kinds) to do things in better and different ways, and it can also help enable emerging technologies and sectors. Fintech's at the core of making them work," Powell says.


The road(map) ahead

Fintech Wales' 10-year roadmap, created with input from local business, is designed to identify the common challenges the Welsh sector faces and will be used to direct future funding and skills delivery.

"This roadmap is needed for two fundamental things - understanding what the common challenges are, and what skills will be needed in the future," says Powell. "We can then address these challenges together and set up a working skills pipeline."

Feedback so far has highlighted demand for regional innovation hubs, and so in the next six months Fintech Wales aims to define a plan for three of these hubs in south east Wales.

"They might be delivering innovation for start-ups or focus on skills; we have to analyse what the local environment looks like and see what will be the best type of hub for that area.

"This is what we're working on now, but we do have other funding proposals," he continues. "We're constantly working on that big ticket, multimillion-pound funding that will enable us to do more and more to support fintech in Wales."