A cluster led fintech innovation programme in the West of England

Those who follow the different Engine Shed channels will be aware that for the past few months we’ve been developing concepts for a new innovation programme focused on the potential of the emerging regional financial technologies (fintech) cluster.  

We originally launched the concept of a regional Fintech Accelerator back at the Bristol Tech Festival late in 2021 alongside FinTech West. As we started engaging with industry and community partners, however, we were inspired to be rather more ambitious. Rather than developing a new accelerator, we were encouraged to explore whether we could build a collaborative set of activities to form a unique programme which is built around the defining strengths, characteristics and culture of the regional cluster.  

Thanks to funding from the University of Bristol, we have been able to move this work forwards through in-depth industry engagement and strategy research with partners from a wide range of perspectives on financial services and technology.  

Research Approach

Our advisory partner Sapphire & Steel carried out qualitative interviews with stakeholders from 26 organisations to provide a broad industry and societal view on the potential and challenges of innovation within financial services. A big thank you to all those who generously gave up their time to contribute this work. 

Context – Where is the financial services industry at right now? 

Whilst innovation within the sector has taken place in recent years, particularly following the global financial crisis of 2007/8, there is a shared perception that progress has now slowed due to the challenges of implementing change within legacy systems and established organisational structures. This also was reflected in insights regarding the role of the financial regulators, with shared frustration that momentum seems to have stalled.   

“FS in UK is leading in some areas of fintech. UK leads on open banking which has already developed into open finance and open data.”

“Open data has not enabled fintechs to hone new bespoke customer offers.” 

“There is support for innovation at senior management and board level, but there is no ability to execute”… Hearts are there, heads and practical frameworks are not.”
 

There was however a shared aspiration around ‘impact-led’ activities which could connect societal and commercial objectives. Notably, there were strategic priorities to ensure environmental, social & governance (ESG) factors are not just buzzwords but represent a vehicle for real growth and impact. There was specific interest across stakeholders in the potential for developing bespoke services which could directly improve financial resilience, sustainability and inclusion for a broader representation of individuals and business.    

“The industry is becoming better at thinking about real world problems, not endlessly pushing products.” 

 “Investors have woken up to the idea that what’s made us successful in the past, won’t do so in future – there’s an imperative for change now.” 

 “Financial inclusion and resilience are a key focus.”
 

Ambition – What would you love to see happen? 

Stakeholder ambitions were centred on delivering strategic objectives for their organisations, with an understandable focus around unlocking opportunities for new revenue streams and creating more effective businesses.  

There was also a strong overarching theme for financial services to play a more active and positive societal role. Rather than being mutually exclusive, stakeholders see impact in areas like financial resilience and sustainability as crucial enablers for the commercial aspirations of the financial institutions. 

“Our strategy is about scale, there is increasing appetite to work with people looking for resilience.” 

Utilise our enormous amount of data to understand people and develop new services.” 

“We want to innovate because it makes sense for our clients, not because it makes sense for us.  It’s got to make our customers more resilient.” 

“Traditionally customers wanted a relationship. Now retention is based on speed, cost, accessibility to data, transparency for trust.” 

The Bristol & Bath cluster is seen as a good finance hub with a ‘buzz’, with growth in numbers of businesses and investment. This can be built upon to support growth and further opportunities. A common view however was that collaborative innovation programmes are not being done well today and haven’t delivered real impact or change within the industry or for customers. There is a real shared ambition for something different to fill this innovation gap and deliver better outcomes for individuals and business. 

“The birth of fintech was around the financial crisis and trying to create better outcomes for customers. If an innovation programme is serving customers and society and that can be proven, then that’s a good thing.” 

“Success breeds success – the reputation, the attraction of talent and finance, that starts to build.” 

“There’s an opportunity to act as a living lab helping to solve problems for the city and how these solutions can plug into the city and show the benefits.” 

Barriers – What could stop the financial services cluster here? 

The barriers to achieving strategic ambitions were summed up by two themes; common barriers that stakeholders had experienced across all innovation programmes, and a universal view that these programmes hadn’t defined sufficiently the problems to be solved, but rather were focused on solutions. 

“Great innovation occurs when you are considering the problem not the solution. When you bring experts in on those conversations.” 

Finally, the lack of diversity of thought across the financial services market was holding back progress. How can strategic objectives for specific services to support individuals or a broader range of business be achieved, if those consumers are not reflected within the organisations trying to develop them? 

“The industry needs to understand that it’s consumer based and so it needs to better reflect the consumers that use its products.” 

Specific challenges for our regional cluster were also highlighted by stakeholders, with particular discussion of access to the right capital and talent to deliver on the potential and ambition.  

“Access to capital to certain extent, but really it’s access to a broader range of capital. It’s easy to come by money but it’s a case of what you’re prepared to give up for that capital. Affordable capital is the balancing factor.” 

“On a practical level [our challenge is] access to talent. For those businesses wanting to scale, access to tech talent is really difficult. It’s been difficult for a few years and it’s getting more difficult” 

 Themes – Which themes might this programme address? 

Given the challenge of a lack of regional identity and the discussion on a lack of focus on specific problems of current programmes, participants were asked to consider whether this new innovation programme should be centred around a chosen theme. While the concept of having an overarching theme wasn’t universally supported, the most commonly identified area with potential again surrounded environmental and societal impact, particularly financial resilience and inclusion for individuals.  

“I’m a bit wary of saying it must tick this theme or that theme because we may get teams coming along just to fit those themes rather than bringing their ideas.” 

“[A focus on] financial inclusion and vulnerability. I know it’s a difficult term in FS but in a broad sense, thinking about the outcomes of people in atypical situations.” 

“Show how to mitigate the cost of living crisis then that could be used all over country and across the whole of Europe. It could be really interesting and greatly impactful and not that difficult to do.” 

“I’d look at social trends and the impact they will have – increasing gig workers, changing nature of home ownership, social themes. The challenges we are facing into as a society.” 

 Actions – What do we need to get right?

Finally, with all these strategic ambitions and challenges considered, what should we really focus on to deliver an innovation programme in the regional Financial Services cluster, which would make the widest impact? 

1. Agree a shared purpose and value exchange 

“Have a very clear proposition for each of the involved players. Get involved in the knotty problems before our clients do.” 

 “Showing the art of the possible is key, where this has worked in the past. Helping us know what we don’t know.” 

 2. Put the right support systems in place, for industry, startup and the community

“The good ones provide support teams not just one person advising. They’re using wider mentoring networks and enabling peer to peer support and mentoring.” 

 3. Establish co-location as a way of working within the programme 

“Co-location is perhaps key. Facilitating that innovation from osmosis. Create that environment of two-way flow.” 

 4. Shift the balance of power to unlock collaborative innovation

“Instead of treating large scale incumbents as customers of a large piece of work, I’d treat them as a trusted partner in a process.” 

“If this programme has communities of interest and startups that support them and this programme allows them to scale on equal terms with the big business, then it has my support.” 

 5. Secure regional funding to support ventures and opportunities within the cluster 

 “You need refined programmes and access to companies but all that needs regional support, after all that’s support for the regional economy.” 

 6. Close the representation gap 

 “Generate new products for the broader benefit of diverse communities. No castle walls and drawbridge. Open innovation in the widest sense.” 

7. Collectively build talent pathways 

“Skills is other thing we’ve haven’t talked about. That will continue to be a major issue. Lack of skills, costs, wider networks, availability, the pace of change. If there was some way this programme could develop these skills and increasing the pool of talent” 

8. Work to benefit the whole ecosystem 

 “The guys who will be successful will always be successful. I try to look at the middle 60% that really need that help, that will benefit from it but don’t know how to ask for it.” 

 So, what next?

We are excited that this work has demonstrated a real collective passion and interest for a different approach to innovation within the cluster and a tangible connection between commercial strategy and social impact.  

We will be re-engaging with those who supported the research and any other interested parties to start scoping an MVP approach based on the actions above. This is likely to involve a support and engagement process to define a set of specific problems or issues faced by consumers and businesses, developing this into a challenge briefing and facilitating a collaborative approach to solving them.  

 The actual innovation activities could be delivered through a co-locating industry and community team in a new FinTech Hub, facilitating open innovation hackathons, pulling together a startup cohort or potentially research teams. The details will come together in the next phase, but what’s important is that our cluster has demonstrated the collective will and ambition to do something different with the potential for far reaching impact.