Capitalise on Ireland’s fintech potential
Encouraging innovation and entrepreneurship, as well as getting the regulatory landscape right, are essential if Ireland is to capitalise on its potential to be the world leader in financial technology, writes John Murphy.
If you work in financial services it is hard to ignore the growing phenomenon that is FinTech. It is the ‘hot’ industry taking all the major financial hubs by storm. It seems everybody wants a piece of the FinTech pie.
John Murphy
John Murphy

Essentially, FinTech refers to the use of technology in financial services. It encompasses a vast array of sub-sectors from payments to security, data analytics to cryptocurrency and many other areas in between. To put the growth of FinTech activity into perspective, there was a $4 billion investment in FinTech globally in 2013, compared to $12 billion in 2014.

Why now?
Of course technology has played a huge part in financial services over the last number of decades, so why is there so much focus on the area now?
Increasing regulation, costs and consumer power are driving the FinTech focus in the FS space to try and enhance profitability of FS players.
The demands and associated costs of financial compliance and transparency have multiplied in recent years. The digital age has led to increased customer power.

Thus, financial services must respond by becoming more efficient and having the right technology solutions to give the customer the service they are demanding, while also reducing costs.

Business models under threat
Thus, FinTech, while a great opportunity for some, represents a significant threat to others. Large financial players are beginning to recognise that their current business models are under threat and they need an innovative response but that their current in house innovation activity may not be adequate.
A number of global and local operations are taking steps to address this. For example, UBS have launched a “Future of Finance” FinTech challenge and Barclays have set up their own FinTech Accelerator, partnering with early stage FinTech companies.

Citi have done likewise, and have set up a development lab in Dublin focusing on FinTech, one of many recent major advances in the Irish FinTech space. Mastercard and Accenture have also focused on innovation in their Dublin bases.

Opportunity
Naturally, the traditional large tech and financial hubs like London, New York and Silicon Valley are at the centre of FinTech investment, but cities like Hong Kong, Copenhagen, Sydney and Singapore are all attempting to put their stamp on the industry.

Dublin also has the opportunity to make its mark with its mix of technology companies and financial services providers in close proximity in the Docklands area.

Ireland is the fourth largest exporter of financial skills in Europe, so the foundations are here to exploit FinTech but Dublin and Ireland has to market itself as attractively as possible from a regulatory, entrepreneurial and investment perspective.

And we have begun to take steps in the right direction. In its IFS 2020 - A Strategy for Ireland’s International Financial Services Sector report, the Government has recognised the potential of FinTech for Ireland and has outlined a number of actions necessary to nurture the growth of the industry here, with the goal of 5,000 FinTech jobs being created by 2020.

But the Government’s intent must be proven with investment and improving regulation. This will encourage scaling companies and effectively build Dublin’s own FinTech eco-system.

Good news stories such as the €115m sale of Realex Payments and the recent $75m investment in Fenergo bode well for Ireland’s FinTech future, however, more must be done in order to challenge London as the FinTech capital of Europe.

Next steps
Steps must be taken to enhance the regulatory landscape for domestic and inbound FinTech companies. The aim being to foster collaboration between startups and incumbent FS players and also to encourage innovation and entrepreneurship. The hope is that the upcoming Budget 2016 will make some strides at a minimum to encourage the innovation and entrepreneurship agenda.
John Murphy is FinTech tax partner at PwC.
This article appeared in the October 2015 edition.