Fintech is exploding.
It is a global industry, striving to change the future of finance.
…And the future is now. At Kurtosys, we’ve set out to cover exactly what’s happening in the financial industry the world over, one country at a time. With so many places contributing to the advancement of our digital world, each deserves their own time in the spotlight.
Next on the fintech track-listing is the Emerald Isle: Ireland. Situated just due West of the fintech world leader (supposedly) the UK, Ireland is showing itself to be a key industry hub in the wake of Brexit, with favourable government initiatives and strategies, a large network of powerful accelerators and the all-important convergence of banks and disruptors to aid its financial dominance.
Known for its wonderful sense of humour, Guinness guzzling and folk history, Ireland is certainly an idiosyncratic nation, in the best possible sense. Even when venturing further afield from the grassy island, you’re bound to meet Irish nationals all over the world. An estimated 80 million Irish descendants live elsewhere, and the national institution of an Irish pub can be found in many of the globe’s countries as a place of joyful merriment. 3 million emigrants still hold Irish nationality too. The island is (strangely) completely snake-free, that being a very good thing, and spookily, this month’s main festival cherished the world over – Halloween – can be traced back to the Middle Ages. The Gaelic festival of Samhain has since evolved into the spiritual holiday we all know and love and Ireland was also home to the creator of Dracula, Bram Stoker, who himself was influenced by an old vampiric Irish legend of Abhartach, and the horror show that is Jedward. Ireland is one of the world’s most poetic countries, and its creative mindset extends to the disruptive world of financial technology. Plus, they’ve won the Eurovision Song Contest a record seven times. Now that’s quite something.
The Road to Recovery
There are many reasons for Ireland’s quite sudden fintech spark. Completed in 2007, Dublin’s Grand Canal area saw the development of many new buildings which, left barren for years due to the financial crisis, saw a revival in 2012 along with the recovery of Ireland’s economy. Since then, Dublin’s historical docklands area has now been suitably dubbed ‘Silicon Docks’, all adding to this series’ documentation of the various ‘Silicon Lands’ across the globe that have followed the technological successes of the Bay Area.
In fact, around 300 international companies have already set up their EMEA headquarters in Dublin, including such monsters as Google, Facebook, Accenture, and Airbnb. This has made Dublin a tech-savvy spot, and considering neighbourly UK’s ongoing Brexit plans, Ireland is becoming one of the first destinations to set up shop, given the close proximity and business-related fame. Plus, drawing in other European workers (as part of the EU), where there is a talent pool of around half a billion people, will also support Ireland’s domestic fintech growth. The tech basis is already there, and as financial institutions look for post-Brexit homes away from the UK, the collaboration between the money world and the digital world can combine right here.
As our reliable informant Deloitte’s Global Fintech Hub Report for 2017 suggests, Dublin is one of Europe’s fintech hubs with the highest potential. It has received an Index Score of 56, ranked the 31st biggest Global Financial Centre, and a high Innovation Index score of 7. What is most notable here for the financial world, however, is the information that Ireland is a major living space for fund managers. Plus, given our extended look into how fund managers’ strategies can be affected by technology, Dublin is home to a high concentration of startups working in RegTech. Fund managers are, of course, blighted by extreme regulations, including the EU’s drastic MiFID II to be implemented in January 2018, all of which can be understood and adhered to through collaboration with such RegTech companies. Another Deloitte publication – its Talent in Banking Survey 2015 – outlines a so-called ‘Google Factor’ as the biggest influence on the country’s fintech surge. Software is the most popular industry for business graduates, with banking close in third place. Ireland excels in its spurring of interest in both sectors, hence the reasoning for its ongoing fintech revolution.
Pyments.com has gone so far as to name Ireland as the EU’s fastest growing economy, but given these other facts, it’s no shock:
- Ireland has been able to attract global firms due to the adoption of the lowest corporate tax rates in the EU, at 12.5%.
- On top of this, living costs are also lower than respective EU cities.
- Technology companies are following in the footsteps of an estimated 80% of global tech companies that are based there, which is higher than any other world city.
- Dublin’s startup ecosystem has an estimated valuation of $2.8 billion, and the city accounts for 42% of Ireland’s entire GDP.
- In regards to the most millionaires in European cities per capita, Dublin is in 10th place, with 1 in 40 people holding such a net worth.
- 40% of the population are under 30.
Alongside the ‘Silicon Docks’ area, the hipster-centric neighborhood of Camden Street, plus the spot of Ireland’s International Financial Services Centre (IFSC) make up Dublin’s main fintech community. Camden Street is home to one of the country’s most successfully funded fintech companies: Plynk, a P2P payments company which raised €25 million in a 2017 Series A round.
With a young, and seemingly financially stable, population, its success can only grow.
This year, financial services juggernaut PwC released their Irish Fintech Survey to gain insights into how traditional financial players view fintech disruption in the country.
Here are the main highlights that we found from the study, which you can view in full at this address:
- 79% of Irish financial institutions expect to increase their internal innovation efforts in the next three to five years.
- 71% expect to increase fintech partnerships in this same time-span. These results are both less than the global average, however.
- 62% are putting disruption at the heart of their digital strategy.
- Only 14% of Irish respondents are familiar with blockchain technology (compared to 24% globally).
- Irish respondents expect an 8% annual ROI from fintech related projects (compared to 20% globally).
- Irish insurers see the increased sophistication of data and analytics to identify risk as more important than their global peers.
- 53% think that wealth management is most at risk from fintech disruption over the next five years.
On top of this, around 83% of banks in Ireland are worried by the speed of fintech development, thinking that these companies will “outpace” them. 27% are currently lacking deals with fintechs, but 69% are actively looking to utilise the services of fintechs as part of their cost reduction and client retention strategies. Whatsmore, investments and nurturing government initiatives are increasingly contributing to the disruption of financial services. There is empirical evidence for the increased funding in fintech courtesy of the Digital Finance Institute: in 2015, investments in fintech amounted to €522 million, a 30% increase from 2014, and a 90% increase from 2010. 46% of these total funds were raised by international investors.
The Irish government’s support is expected to generate 5,000 new fintech jobs by 2020. Amongst its initiatives include the Department of Finance’s IFS2020 strategy, which is indebted to the promotion of Irish-based fintech globally, engage in trade missions, and develop infrastructure and the regulatory environment. Speaking of which, the government is also contemplating the adoption of the regulatory sandbox principle utilised by the UK to lax the rules startups must adhere to in their growth stage, for a certain time, and there is even a fintech ambassador for Ireland to assist the development of foreign regulatory policies. Elsewhere, a €500,000 grant fund has been set up for Irish fintech startups, helping to fund co-working spaces (which we will look into more later).
The Fintech & Payments Association of Ireland (FPAI) outlined in its 2016 Strategy for Fintech in Ireland that financial services employs around 40,000 workers, and a further 100,000 work for technology companies. Fintech (the merger of both) apparently employed around 8,800 at the end of 2016, a rise of 7% year from the year before, according to the IDA and Enterprise Ireland. The former is the governmental agency which attracts foreign direct investment to Ireland, whilst the latter is a government arm for Irish export business. It has its own fintech team based in Dublin to manage 220 clients in their portfolio. The FPAI has also created a Regulatory Special Interest Group which has made four formal submissions to the European Banking Authority (EBA), the Department of Finance and the Central Bank of Ireland (BOI) on regulatory issues such as the adoption of PSD2, and the 4th Anti-Money Laundering Directive. Further insights into the group’s efforts can be read in this insightful interview with one of the FPAI’s founding members, Anna Scally.
Ireland’s Co-operating Charm
Returning to the topic of co-working spaces, accelerating and incubators, Ireland is an exemplary country adopting such development stations. Most notably, Ulster Bank is a perfect example of a traditional institution looking to collaborate with the disruptor community which it could see as a competitor; Ulster Bank has partnered with Dogpatch Labs by basing its innovation solution team in the workspace. Three distinct fintech accelerators have been established in Ireland: National Digital Research Centre (launched in 2014), MasterCard’s accelerator programme (located in its global R&D innovation lab in Dublin), and Accenture Innovation Labs. The latter example was established in 2015 and has a three month accelerator programme based at the Guinness Enterprise Centre in Dublin , providing startups with a chance to network with such leading companies as AIB, Bank of Ireland, Credit Suisse, Citi, Fexco, Google and State Street. It is one of four Accenture accelerators in the world, the others situated in New York, London and Hong Kong. The BOI has unveiled its StartLab in Camden Street. This incubator funds 10 fintechs with €50,000 as part of Enterprise Ireland’s €1.5 million Competitive Start Fund, and is looking to expand to support 30 Irish startups in the future.
Similarly, Deloitte’s Dublin branch, according to Coindesk, was named the massive firm’s centre of excellence for EMEA and after hosting a successful hackathon in November 2016, Deloitte was approached by the Bank of Ireland to help build a blockchain solution to comply with MiFID II, whereby client interactions would be tracked on a distributed ledger for transparency. Since, Deloitte opened an EMEA Financial Services Blockchain Lab in the January of this year in the Silicon Docks era. The development team is expecting to double in size from 25 to 50 this year alone. Irish Funds is also working with the company and other industry experts to develop a blockchain solution for proof of regulatory reporting. Deloitte’s efforts in Ireland are clearly not going unnoticed. Handily, Deloitte have also produced this infographic to illustrate both the financial services and fintech environments in the country:
Given all of the information about Ireland’s nurturing government initiatives, technological prowess and forward-thinking strategies from domestic banks, here are a few of Ireland’s fintech startups of note, firstly with one of the ‘Emerging stars’ from the KPMG Fintech 100 2016, AQMetrics:
AQMetrics – Compliance and risk management software for asset managers and investment managers. Data management, risk profiling and monitoring, compliance workflows and reports are all available in its cloud based solutions, and the emerging directives of MAD II, MiFID II and AIFM Directives are supported with global regulatory reporting. Founded in 2012 by Geraldine Gibson (CEO) with its HQ in Maynooth, Kildare, just outside of Dublin.
Aztec Exchange – Added to Forbes’ Fintech 50 in 2016 and founded in 2012, Aztec Exchange offers low-cost invoice discounting for suppliers and supply chains of major corporations and launched e-invoice finance solution PayMe in May 2016 where suppliers can sell their invoices online, and receive capital within days. Based in Dublin.
AID:Tech: A platform tailoring enterprise level solutions for aid and social welfare programmes. It uses a voucher system with unique IDs for refugees to receive aid using blockchain technology. It was founded in 2016 by Joseph Thompson and Niall Dennehy (COO).
Circle – A P2P payments app with its HQ in Dublin, backed by $136 million from large investors including Goldman Sachs, Accel and IDG China. It was founded in 2013 by Jeremy Allaire (CEO) and Sean Neville (President of Product & Operations).
Fenergo – Fenergo has become the industry standard for Client Lifecycle Management software, handling client onboarding, compliance and banking process management. It secured $85m in funding in 2015 from Insight Venture Partners and Aquiline Capital Partners. Based in Dublin, it was founded in 2009 by Marc Murphy (CEO).
Fund Recs – A cloud-based SaaS which attempts to develop the most cost-effective reconciliation software. It was named European Startup of the Year at the ICT Spring Conference in Luxembourg in 2016. It was founded in 2014 by Alan Meaney (Director) and Padraig O’Scanaill (Director) with its HQ in Dublin.
Realex Payments – Acquired by Global Payments in March 2015 for around €115 million, Realex Payments was a leading European payment service provider, which has processed over €28 billion for over 3,000 international companies. It was founded in Dublin by Colm Lyon (CEO).
What with Brexit issues still being prevalent in the UK, the hunt for some financial services companies’ new homes ends in Ireland. Housing a hotbed of technological leaders and traditional players keen to adopt the solutions of fintechs, it seems only a matter of time before the Silicon Docks of Dublin become the fintech industry standard for innovation.
If you have any thoughts about Irish fintech, let us know in the comments below, or you can tweet us.
Check back soon for more instalments of The Fintech World Series!
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