Q: In 2016 (writing in Finance Dublin) you said that customer loyalty in financial services was increasingly been seen as a thing of the past. Why? - was it that consumers were becoming more fickle or did they have justification. How different is the picture today?
The relationship with consumers and the nature of loyalty is evolving again and more positively, particularly after the last 18 months. As we emerge from the pandemic, I believe we will see new patterns in loyalty and the relationship people have developed with their service providers. In financial services the winners will be those who have differentiated themselves in helping their customers through the crisis and those who continue to lead their peers in enabling their customers.

Brand loyalty across all industries has been in decline and the nature of consumption has changed. Information is more democratic, and there is a greater ability to compare and find the best offers. This trend is evident in financial services. Consumers are more aware and discerning when selecting or renewing financial products. There is a proliferation of private comparison sites, and public initiatives for greater transparency.
Customers respond best and remain loyal to those providers that deliver excellent service and experience around their key needs. This is especially true of banking. Irish customers have had their expectations raised by new and innovative digital providers who have capitalised on the experience gap. They are now looking for a deeper level of support and quality in their interactions with their financial services providers. Irish institutions have been responding, and they have to.

The experience of the pandemic has played a role in rebuilding customer trust and loyalty. Supporting customers through the crisis, transmitting stimulus, accelerating forbearance measures and launching innovative product offerings have all contributed to consumers revisiting their relationship with traditional financial service providers.

Leaders in customer experience are combining financial products with non-financial products. They are integrating banking products with health, retail, education, wellbeing and housing offerings. They are breaking down industry silos and creating customer-supporting ecosystems. It's an exciting new paradigm I can see growing in the future.

Changes in the financial services landscape have accelerated in the past couple of years - shown by an upsurge in M&A and equity investments?in financial services in Ireland in 2020 - and the trend is continuing. How would you explain this?
I believe we're at a major tipping point in the financial services sector. Financial services has been one of the last largely undisrupted sectors, but what's happening in business globally - in terms of technological evolution, policy change and challenger brands shaking up the marketplace - is having an effect. Competition and disruption are good for customers, and for the sector.

Financial services players are realising that the high price of keeping pace with this new competition is better spent on forming new partnerships. Working with, and often acquiring, innovative and imaginative businesses adds functional capabilities that otherwise might have taken years to build.

Deals activity in the Irish financial services landscape picked up steam again in 2021. The M&A pipeline has reopened as firms recover the confidence to act on their strategic priorities. Deals undertaken by the Irish pillar banks are good examples of this. Loan book sales and acquisitions of wealth management capability mark a strategic shift.

At the same time, there has been a high level of private equity coming into Ireland’s financial services landscape. External investors have been amassing resources and are looking on as new models and opportunities emerge. Their investment focus has broadened out of the larger markets like the UK, Germany and France, and Irish financial services firms are benefitting. There have been notable private equity investments into Ireland’s funds and technology sector including Carne, Waystone and Davy’s ManCo business.

Recipients of private equity investments will most likely use the windfall to pursue further acquisitions themselves. This should fuel future M&A activity in the medium term, which is great for the sector.

You have taken up a role that has oversight not just for Ireland but as part of an EMEIA organisation. With Brexit developing and equivalence raising the spectre of change with regard to Ireland, UK and Europe this raises interesting challenges and opportunities. How do you see that affecting Ireland’s prospects as an IFC? And, how do you see the opportunities and challenges that Brexit has brought Irish financial services companies?
Well before Brexit, global financial services firms were simplifying and streamlining their EMEIA footprint. They were consolidating their banking operations into single branch, subsidiary and broker dealer structures. Brexit accelerated this pattern. We've seen a significant increase in the number and size of non-domestic financial services institutions who have chosen Ireland as their EU hub.

The immediate impacts of Brexit have been worked through, but there are years of adjustment ahead for financial services. The “equivalence” regime you refer to, relates to the potential for regulatory authorities in the EU and UK to offer each other’s financial institutions reasonably similar frameworks and safeguards. This is a long road to travel and there are several forks along the way. Primary amongst these are the new requirements of Investment Firms under the Investment Firms’ Directive, and the potential for a new EU supervisory model for third country branches.

Ireland's existing strengths as a financial centre outweigh the risks of any potential disruption as the equivalence framework solidifies. The need for a long-term, sustainable solution to operating across Europe, clearly has an impact for the UK FS sector. Ireland remains an attractive location for financial services organisations looking to do business in the EU. Our depth of experience in financial services and access to EU markets, combined with our highly skilled and English-speaking labour force - as well as our significant critical mass in tech-centric FDI - will only make Ireland more appealing for relocation and expansion.

We know how EU markets operate and how to get the best results. We need regulation and policy to continue to evolve to support the evolution of the sector Revisiting Ireland for Finance 2025 and benchmarking the progress made toward its goals would be timely. 2025 isn't far away. Updating the strategy considering Brexit would help kick-start the next phase of making Ireland the top-tier location of choice for specialist international financial services.

Sustainability is at the forefront of FS Companies' concerns as ESG becomes an increased focus at the C-Suite level.?What will be the impact of these considerations in the financial services industry of the future?
We all recognise that we need to act now, collaboratively and with purpose, to reverse the damage to our planet done over the past hundred years. There's no time for organisations to just pay lip service to this. They need to form the foundation of strategic thinking in the boardroom and execution at ground level.

Governmental commitments to net zero need to be upheld and exceeded. Activities need to satisfy stakeholders, regulators and customers equally.

Transparent, climate conscious and ethical behaviours are key. Here at EY we are proud to be carbon negative in 2021 and targeting to be net zero by 2025.

Financial services providers in Ireland are at the vanguard of integrating environmental, social and governance (ESG) factors into their organisations. They are adapting their business strategies and modelling to reflect key sustainability considerations. The EY Sustainability Index scores the Irish banking sector within the top ten countries globally on ESG activity in 2020. This is relative, though, and we're only at the start of a long journey.

The financial services industry enables the real economy and aims to support each industry to transition to a new, sustainable footing in terms of emissions. That transformation is complex and cannot happen without investment.

When it comes to financial services, investments need to be both sustainable and principled. By helping businesses have awareness of the full scope of risk and opportunities, we can help them make ESG a core value. It is clear that the only world that truly works for everyone is a sustainable world, and we can't get there without sustainable finance.

The future of retail and commercial banking in Ireland, whilst challenging and exciting must also contend with issues regarding regulation and the cost of capital, as also in the insurance industry.?(This point has been revisited, for us, in Finance Dublin by James Maher in our latest issue - “Something's got to give”). How do you see a balance being achieved?
Retail and commercial banking in Ireland are integral to the recovery of the economy in the wake of the pandemic. So, it's vital that they're supported, and able to meet the challenges that they're facing. But they are subject to a complementary relationship with the regulator.

The regulator and the banker have different but challenging balancing acts. The regulator must ensure our banks are adequately capitalised to withstand economic shocks whilst at the same time protecting customers and ensuring that credit flows into the economy. The banker has the task of meeting the capital requirements set by regulators, whilst at the same time maintaining an efficient cost base, providing credit at a rate that is competitive and affordable for customers.

If capital levels are too low, our banking sector and wider economy can be at risk, as evidenced by the last financial crisis where taxpayers needed to step in to recapitalise banks.

If capital requirements are too high, our banks’ ability to offer credit at competitive rates is constrained and markets can become less attractive to new entrants. In addition, as this extra level of capital is seen as “trapped capital” by investors. It can have a negative effect on the share valuation of retail banks, where the State still has significant ownership.

Maintaining a balance between a safe and sufficiently capitalised banking sector with one that is cost-efficient and competitive is essential to the ongoing viability of the sector at large.

Our banks will need to balance these cost and pricing challenges to deliver sustainable returns for their investors whilst simultaneously meeting minimum capital requirements to ensure the ongoing stability of the banking system at large.

To do so, they will need to focus on the set of levers available to them to reduce cost, pursue growth and diversification opportunities and improve the overall risk profile of asset quality across their balance sheets.

COVID-19 has brought huge challenges for the financial services industry. How can we emerge better from this?
There is no doubt that the pandemic has brought huge challenges to the industry and to each of us personally. It's important that we seek out some of the great stories of success and human achievement that have occurred. There are many examples of industry players - both organisations and individuals - leading through uncertainty, providing support at key times and enabling customers through the crisis.

We've learned new skills in working smart while physically apart in an increasingly globally connected world. We've accelerated the pace of digital investments and enabled consumers to manage their financial needs from their location of choice. There is benefit in this for us all.

I think we are still in a period of change and opportunity. If we're smart, we can make huge leaps forward in understanding how organisations function, the importance of effective collaboration, how borderless the business world can be, and how fast we can truly innovate if we shift our perception of barriers to change.

For EY, it’s been an opportunity to hit reset and look at how we prioritise the things that matter the most – our people and our planet. We have critically reassessed the way we work, and where. We are creating a meaningful and sustainable work-life balance. We’re baking flexibility into our hybrid working model for the future and making sure that people have a say in the way they work. We’ll have working arrangements and locations that are right for our people. We can bring talent from anywhere in the world to help our Irish clients. And by reducing the amount of commuting we collectively do, as well as committing to a net-neutral position, we can play a meaningful part in combatting climate change.

EY as an organisation, operates in a special way with regard to EMEIA organisation etc.? What distinctive features do you see it bringing to the financial services consulting and assurance marketplace?
At EY Financial Services we have an operating structure that combines the best aspects of being an Ireland-focused partnership while being part of an integrated European business. Across EMEIA, our Financial Services Organisation employs over 14,500 professionals. They operate as an integrated practice.

We're a single team working seamlessly to provide a consistent approach, no matter the location. Our clients aren't limited by borders, so we mirror their organisations to provide them with the best possible service.

Our model means we bring global insights and skills to our financial services clients. Our domestic clients want to understand and learn from international best practice, and our cross-jurisdictional clients need broad coverage and connectivity.

Given the significant challenges and opportunities facing the sector in the coming years, we'll be able to access talent and insight and bring it rapidly to our local clients. Our structure also maps well onto many industry regulatory structures and jurisdictions, enabling us to read across different markets. We’ll help our clients quickly assess and effectively respond to new regulations and supervisory patterns.