In June 2023, the Edinburgh Futures Institute, in collaboration with the University of Edinburgh Business School, hosted the second Economics of Financial Technology Conference. The conference brought together academics, policymakers, and finance professionals to share new insights and discuss economic issues related to the application of technology to the practice of finance. The conference also featured the official launch of the Edinburgh Centre for Financial Innovations.
The Edinburgh Centre for Financial Innovations emerges out of the Futures Institute’s longstanding investments in financial technologies, such as the Centre for Data and Society’s Fintech and Financial Services Research Cluster and our doctoral programme in Fintech. Under the leadership of Professor Gbenga Ibikunle , Professor Tiejun Ma (School of Informatics) and Dr Miguel de Carvalho (School of Mathematics), the centre consolidates the University’s existing strengths in financial technologies across the University’s colleges.
In line with the Futures Institute’s broader vision, the Edinburgh Centre for Financial Innovation will facilitate interdisciplinary research on how financial technologies can help address some of the most pressing societal challenges. Researchers at the centre combine expertise from various disciplines to address three central themes:
- The safe and fair application of AI/intelligent/autonomous systems in the delivery of financial services and associated security and regulation issues;
- Exploiting open finance and related data frameworks to develop equitable and dynamic incentive-based data-driven solutions to address significant societal challenges, such as climate change;
- Addressing consumer financial insecurity and vulnerability
Finance and climate change
One example highlighting how the Edinburgh Centre for Financial Innovation leverages data-driven financial research for global impact is its recent work on creating a Green House Pricing Index. As increasing energy costs, growing flood risk, and rising sea levels promise to drastically affect real estate worldwide, researchers at the Centre, in collaboration with NatWest Bank, created a house price index that measures the impact of climate change on property values.
The Green House Pricing Index not only allows NatWest Bank to account for these factors in financial decision-making but highlights the often disparate impact of climate change on different socioeconomic demographics. For instance, the work conducted by the centre reveals how policy interventions facilitating the adoption of flood risk insurance favour wealthier, older, and rural property owners, but are less valuable to poorer and younger urban populations. Understanding this disparity can help industry and regulators in the financial sector develop solutions that are both socially and environmentally sustainable.
The fight against climate change will also lead to a profound transformation in the economic landscape as the pursuit of net zero targets poses challenges to the financial situation of businesses across sectors. Another project supported by the centre, led by Professor Luca Taschini, seeks to explore the impact of this “transition risk.” For instance, how do climate mitigation measures and the changing regulatory landscape impact the ability of corporations to manage their debt? While answering those questions, the team will also consider how transition risk differs across jurisdictions, sectors, and regions.
Rather than an exclusive focus on academic research, Gbenga Ibikunle stresses the “impact first” strategy of the Edinburgh Centre for Financial Innovation. Projects such as the Green House Pricing Index and transition risk modeling illustrate how the Centre seeks real-world solutions to real-world problems.
Central to the success of projects is the close relationship with Edinburgh’s fintech landscape, involving organizations such as FinTech Scotland, NatWest Bank, and Smart Data Foundry. As Gbenga Ibikunle notes:
“While the University of Edinburgh has one of the most vibrant clusters of fintech researchers, we rely on industry partners to help us identify and characterise the most pressing problems. Together, we then leverage innovative datasets in innovative ways.”