Soar’s Andrew Duncan | Fintech through the pandemic

by James · September 13, 2022

The Scottish Financial Technology Awards return after a two-year hiatus on 6 October to celebrate Scotland’s thriving fintech ecosystem.

When the awards were last held in 2019, the world was a different place. For Scotland, its technology sector, and fintech in particular, the environment they work in is radically different from what it was in 2019.

At the last Scottish Financial Technology Awards, Soar took home both the Social Impact and Rising Star awards in recognition of helping the less affluent.

Ahead of the upcoming event, DIGIT spoke to Soar CEO Andrew Duncan to discuss how Scotland’s fintech sector has changed since 2019, as well as the new challenges and opportunities presented in 2022 and beyond.

Back to 2019

For the most part, the Scottish and UK fintech sectors were strong back in 2019. When the year started, the number of Scotland-based fintech SMEs had grown threefold compared to 2018.

This growth continued throughout the year, rising more than 60% from 72 to 119 SMEs.

And for the UK, the second quarter of 2019 also secured the country’s fintech investment of £740m, a record at the time.

“Fintech was a vibrant and vibrant market in Scotland, as well as across the UK,” recalls Duncan. “There were a lot of people who were very interested in either starting new fintechs or had started and scaled them.”

That’s not to say that there weren’t challenges for fintech, and the country as a whole, back then.

For example, a key problem fintech had to do with was the digitization of financial services. While standards such as open banking existed, they were still in their infancy. For many organisations, digital transformation plans were still years long and not a priority.

And for customers, analogue financial solutions such as cash, physical stores and visits to bank branches were still widespread over mobile apps.

For Soar, one of the wider social challenges it was trying to tackle was the poverty premium, where people on below-average incomes were forced to pay more for some financial services.

“Getting access to good savings, helping people save, helping them spend less on lending through high-cost credit like payday lenders and loan sharks was a critical issue we were trying to solve back in 2019,” notes Duncan.

“And that hasn’t changed. In fact, it’s even worse now than it was then. But it was a huge potential growth market for us.”

The pandemic hits

And then came Covid-19. For all businesses, not just fintechs, the pandemic threw plans into disarray and new challenges emerged, almost overnight.

But in other ways these challenges provided opportunities.

A good example of this is the digital transformation. Covid-19 forced many companies to accelerate their digitization plans. Within weeks, organizations around the world had to adapt or die.

And for UK fintech companies, many of them had the solutions needed to keep businesses running.

“The reality was that in technology and fintech there was a great opportunity,” says Duncan.

“We had a whole range of customers who were not completely digital. But the pandemic focused their minds, and a week or two after the pandemic started, everyone wanted to be able to answer phones from home, access their core systems remotely, or get apps out to their customers.”

But even for well-positioned companies, the pandemic raised challenges. For fintechs, and finance in general, the uncertainty surrounding Covid, especially in the earlier days, was a big problem.

“Quite a few of our clients or prospects have just stopped their business altogether,” notes Duncan.

“They put everything on hold because they couldn’t guarantee that the decisions they made on people applying for loans would be accurate and representative of the post-pandemic scenario.”

This was not unique to the financial sector. Despite the solutions offered by technological platforms, ambitions fell and plans were put on hold rather than treading water. For companies offering fresh products and solutions, the pandemic years made it a difficult environment to sell in.

“Many businesses ended up going into basic survival mode just to deliver the core service and make sure customers were served,” noted Duncan. “They weren’t necessarily looking to expand their business at the time.

“No one wanted to be sold a new thing.”

Fintech beyond the pandemic

As the world emerged from the pandemic, old challenges led to new ones. 2022 has seen weak economic growth and the cost of living crisis, creating a difficult operating environment in economies around the world.

“Some businesses in a pandemic won’t have done well because it just put a pause on things,” says Duncan. “They couldn’t get the traction they needed.

“I know fintechs that haven’t survived the last couple of years.”

For the most part, fintech has defied many of the challenges facing the UK and Scotland to continue to grow.

Although slower than growth in 2019, 2021 saw a 27% increase in Scottish fintech firms, reaching 190 firms.

And investment has also been strong post-pandemic – for the UK as a whole, 2021 smashed the record set for 2019 when it brought in $11.6bn (£8.5bn) in 2021. Not only was this more than double the the 3.3 billion pounds. in the whole of 2019 it was 217% more than in 2020.

And 2022 looks set to continue that trend. For the first half of this year, fintech investment in the UK rose by 24% compared to the first half of 2021, reaching $9.1 billion.

“Moving forward from the pandemic, the positive thing is that all the businesses that have survived the pandemic so far have all adopted some form of digitization through the pandemic,” notes Duncan.

“The pandemic has really enabled businesses like Soar to start preaching to the converted instead of trying to convert them. I think every business we spoke to already knows they need to do something like improve the way they enable customers to access their accounts online.

“And that’s where fintech has definitely won.”

“We have some fintechs that want to try to sell their services directly into tier one and tier two banks. Procurement is often something that gets in the way there. You can have the best idea in the world, but if you don’t get it into your hands on people who can use it, your idea is worthless.”

But despite these challenges, there are still new opportunities for fintech companies to seize in 2022 and beyond.

“Financial services has an absolute ton of data,” observes Duncan. “And they’re not incredibly good at using them to innovate and come up with the next thing for their customers.

“Fintech is evolving to do better things with the data it carries and provide insight and analysis back to the market to either create new markets or enable businesses to make better use of the data they have.”

He adds: “There is an opportunity for fintech to step in and offer additional services to make businesses more proactive.”

Fintech Summit 2022

Our next conference is the Fintech Summit, held live and in person at Edinburgh’s Dynamic Earth on September 15th.

Now in its ninth year, the Fintech Summit is Scotland’s largest annual gathering for fintech professionals, providing an opportunity to reconnect with industry peers, build new relationships and explore the latest developments across the sector.

To secure your place at the Summit, please visit: www.fintech-summit.co.uk