AN announcement last week by an Edinburgh firm provided evidence Scottish financial technology businesses can succeed on the big stage but had a bittersweet edge to it.

Nucleus Financial announced that assets under administration on its systems had increased by eight per cent in the latest quarter, to £17.4 billion.

The news provided reassurance that despite the turmoil seen over the past nine months things are going well at a company that is a star in Scotland’s emerging fintech sector.

READ MORE: Financial technology firm to keep on hiring despite uncertainty caused by coronavirus 

The sector is set for rapid growth as firms turn to new technology to help them compete in global markets.

Politicians think the fact Scotland is home to a significant financial services industry and world class universities means it is well placed to prosper in the fintech business.

HeraldScotland:

The achievements of Nucleus will reinforce those hopes if it remains based in Scotland. But with bidders eyeing Nucleus that can’t be taken for granted.

Nucleus grew assets under administration by 8% on an annual basis in the year to 31 December.That was no mean achievement in a year when markets see-sawed amid the turmoil triggered by the coronavirus crisis.

The FTSE 100 has rallied since October, with hopes that coronavirus vaccines would soon be made widely available helping to allay the fears caused by the rapid spread of a new variant. However, the blue-chip index still finished 2020 some 12.5% down on the year.

The progress made by Nucleus reflects the success it has enjoyed in capitalising on a big shift in the pensions and long term investments markets. Nucleus has developed online platform technology that people can use to manage their investments. Demand for platforms is booming amid policy changes that are requiring people to take increased responsibility for saving for retirement.

READ MORE: Edinburgh fintech acquires Glasgow business

Nucleus Financial’s chief executive, David Ferguson, is to be applauded for having the insight and the nerve to take the risk involved in launching Nucleus in 2006 after working for finance sector heavyweights such as Ivory & Sime. Nucleus has more than 100,000 customers. It floated on the stock market in 2018.

A key element in the company’s success has been the willingness it has shown to continue investing in growth despite big changes in market conditions. That has meant investing in people in areas ranging from software development to customer services.

The company continued to recruit while it grappled with the challenges posed by the pandemic and associated lockdowns. Nucleus grew employee numbers in Edinburgh to 250 by the start of November, from around 235 in March.

In November it added 130 employees in Glasgow through the £1.5m acquisition of a business it had been using to provide back office services .

The company bought the operations, which ran under the OpenWealth brand, from America’s GenPact. This provides services for wealth management firms. GenPact had bought the OpenWealth investment management software business, and its Glasgow centre of excellence, from Citibank in 2015.

The fear now is that the enlarged Nucleus will get gobbled up itself as corporations and financial investors look to capitalise on the big changes sweeping through the financial sector.

In early December Nucleus announced it had received multiple takeover approaches, including one from the London-based Epiris private equity firm, which is acting with platform specialist James Hay. In the following weeks three of the suitors said they had no intention of making an offer for Nucleus. Epiris and James Hay have not ruled themselves out of the bidding.

READ MORE: Shares in Edinburgh investment technology firm soar as potential bidders stalk business

South African financial services group Sanlam could be an important factor in how events unfold. It provided early backing for Nucleus and has a 52% stake in the business.

A full takeover of Nucleus by a firm based outside Scotland would spark concern about the implications for jobs and investment in the country.

The loss of another listed company would have ramifications for professional services providers in sectors such as law and accountancy. With private equity firms sitting on huge amounts of cash, other Scottish firms could soon find themselves in the sights of bidders.