a fintech strategy for ireland - fsi.iea fintech strategy for ireland 6 7 1. introduction executive...

1. Introduction

A FinTech Strategy for Ireland


2

A Fintech Strategy for Ireland

3

1. Introduction

ContentsContents 2

Foreword 2

FPAI FinTech Working Group 4

Executive Summary 6

1: Introduction 7

2. Vision for FinTech in Ireland 12

3: The Market Today – Ireland within a Global Market 14

4: Underlying Technologies 27

5: Ireland’s Competitive Advantage 29

6: Key Recommendations & Priorities for Ireland 32

Foreword by Brian McCabe Head of EMEA Product &

Innovation at State Street and Chairperson of FPAI

FinTech working group

With an entrepreneurial culture, a positive

business climate and, thanks to the IDA, the

presence of world leading multinationals,

we have the potential to achieve success. In

addition, where our success in the 1980s and

1990s in high technology industries rested

on Foreign Direct Investment, the FinTech

industry now holds out the exciting prospect

of achieving success through established

foreign and indigenous firms and indigenous

dynamic start-up companies working

together. Ireland’s global position in asset

services, pharmaceuticals and status as

destination of choice for the world’s cutting

edge technology companies – shows that

this aspiration is very achievable. Given the

level of disruption across the FinTech space

ones ability to build products and great

businesses that can satisfy a global appetite

requires different thinking, or at least requires

one to branch outside the usual paradigm. In

an industry in which capital and critical mass

are crucial, the funding environment for start-

up and growing companies is a key priority.

Ensuring access to the best possible skills,

from Ireland and abroad, is also essential

to so that the industry both benefits Ireland

in terms of employment while attracting key

talent from, and forging strategic links with,

deep pools of activity around the world. The

prospect of achieving an EU wide market

for financial technology – that benefit SMEs

looking for finance, consumers seeking faster

and cheaper ways to do business, savers

and pensioners – is particularly exciting, but

challenging also.

Ireland’s position within the Euro is, combined

with our strong links to America and Asia, a

particularly strong asset in our favour. Brexit,

whilst there is still a lot to play out before

we fully understand the true impact, and it

is true that it has brought a large degree of

uncertainty to businesses and their future

planning there may also be opportunities for

Ireland to step forward. As the UK review how

they may operate and interact with the EU in a

post Brexit environment we already see large

financial institutions considering their options

which include establishing some form of

entity in other EU states. Ireland should be

seen a good alternative here, being the only

English speaking country in the EU in a post

Brexit scenario, plus a strong asset servicing

environment and capability will also be a

differentiator for us. Globally the success

of locations like Singapore, Israel and Hong

Kong serves as a reminder that Ireland can

never be complacent about the challenges

it faces to rise to international prominence in

this demanding industry. At the same time,

the very rapid uptake of mobile technology

in the developing world offers tremendous

potential for Irish companies to achieve

rapid growth in new markets. Most of the

ingredients for success are present in Ireland.

What is now needed is a dynamic strategy,

will to close gaps that exist between Ireland

and our peers and to ensure both industry

and government focus on the most promising

areas of growth. The views set out in this

paper are those of the FPAI, its members and

other interested parties. It is intended that the

output from this paper will be an input into

the Government’s overall FinTech strategy.

We would like to thank those that have

contributed to the production of this

document; a document that is testimony to

what is required and possible, demonstrating

close collaboration amongst industry players

and competitors alike.

Welcome to the first ever strategy report on the future for Ireland’s

FinTech industry. Given the rapid pace of change in both finance

and information technology, it is likely to be the first of several

such reports. From a well-established core of excellence in

areas such as payments technology, asset servicing and aircraft

leasing, Ireland’s unique blend of talented entrepreneurs, world

leading high technology and financial services companies and

welcoming business environment is blending with a growing

hunger for new and more innovative types of financial services

that deliver greater efficiency and cost savings but increasingly

also exciting and new types of consumer value. The result of

this is that the success of firms in the payments eco-system

is now being complemented by firms that are growing rapidly

in foreign exchange, regulatory technology and online lending.

Their progress is the tip of the iceberg in terms of what Ireland

can accomplish.


4 5

FPAI FinTech Working Group

FPAI FinTech Working Group

The production of this document has been initiated by the FinTech and Payments

Association of Ireland (FPAI) and managed by Financial Services Ireland (FSI), Ibec and

EY on behalf of the IFS 2020 FinTech Working Group.

Leading professional services firms EY and Deloitte have been a key driving force behind

the production of this document – contributing resources, conducting analysis, and

providing planning and editing services throughout.

IFS 2020 FinTech Report & Group Steering

Brian McCabe (Chairperson) State Street

Marc Coleman & Aisling Mc Niffe (Secretariat) FSI

Jonathan Ryder (co-Chairperson) & J’aime Moses EY

David Dalton & Cillian Leonowicz Deloitte

David Tighe Bank of Ireland

Aman Kohli Citi

IFS 2020 FinTech Working Group1

1 Also includes members of the Central Report Steering Group listed above. Contributors listed alphabetically.

Billy Hanley Enterprise Ireland

Brett Meyers Currency Fair

Cecilia Ronan & Vikram Paranjpe Citi

Dave Anderson Ammeon

Deirdre Giblin NCI

Derek Butler Grid Finance

Furio Pietribiasi Mediolanum

Geraldine Gibson & Claire Savage Aqmetrics

JB McCarthy & J Hayes UCC

Joe Dunleavy Pramerica Systems

Ireland Ltd.

Joe Redmond Fexco

John O’Connor William Fry

John Paul McKenna Ulster Bank

Keith Fingleton IDA

Kevin Loaec & Paul Williams Chainsmiths

Kieran Fitzpatrick Barracuda FX

Lesley Tully Bank of Ireland

Marc Murphy Fenergo

Morgan Lynch FPAI

Peter O’Mahony Linked Finance

Phil McCarthy Credit Suisse

Sinead Barry Accenture


6 7

1. Introduction

Executive Summary The “IFS2020 – a Strategy for Ireland’s Financial Services Sector 2015-2020”

sets out the Irish Government’s vision for the future of Financial Services in

Ireland and presents a five year strategy to further develop Ireland as a global

leader in the sector. This document sets out a new strategy and vision for

FinTech in Ireland.

Our vision is for Ireland to support and foster a vibrant, globally-orientated FinTech hub that is synonymous with; the development of cutting-edge technology; the design of great products and solutions, and the Growth of Globally scalable FinTech firm; Making Ireland a FinTech destination of choice.

At the outset this document aims to set the scene with a definition of FinTech

and an overview of FinTech in Ireland and Globally – setting out key investment

statistics which demonstrate the significant growth in FinTech which has taken

place.

We then examine the key success factors or attributes of a well-functioning

FinTech eco-system and analyse Ireland within each, showing the current

status across Talent; Capital; Policy; Demand and Technology. This is set within

a global context with key characteristics of other competing jurisdictions also

highlighted.

Finally we look to draw out Ireland’s key competitive advantages and provide a

set of recommendations across six key categories:

1. Stronger FinTech Eco-System

2. FinTech’s Talent pipeline of the Future

3. Financial Technology and Regulator engagement model of the future

4. FinTech’s Capital Injection

5. FinTech Brand – Driving Demand

6. Technology Capability

1: Introduction

What is FinTech:

FinTech can be defined as ‘Organisations combining innovative business models

and technology to enable, enhance and disrupt financial services’1. It can

represent many things but at its most basic FinTech represents the intersection of

finance and technology.

Key strands of FinTech activity include:

• Established multinational and indigenous firms pioneering research and development in new technology to deliver existing or new financial services.

• “Disruptor” companies – often start-ups – exploiting information technology platforms to service consumer products such as payments.

• Information technology companies using strong market presence and financial strength to enter the financial services arena.

• Third level education institutions that fuse research in financial services and information technology.

• Technology collaboration centres which provide a bridge between research, education and industry by conducting applied research of commercial interest to specific sectors (e.g., CeDAR, GRCTC, Insights).

FinTech Globally:

The FinTech sector is growing globally in terms of investment, employment and

the number of FinTechs, but it is far from mature.2 In 2015 FinTech start-ups,

broadly defined, attracted $13.8 billion in venture capital funding worldwide3.

This is more than double the amount attracted in 2014 and encompassed

approximately 650 deals of which just over one fifth4 took place in Europe. This

volume of activity reflects not only the impact of recent global recovery, but a

deeper structural and more lasting shift towards new technology.

1 EY, UK FinTech: On the cutting edge2 UK FinTech: On the Cutting Edge, EY, 20163 The Pulse of FinTech 2015 in Review, a Global Analysis of FinTech Venture Funding KPMG, 20164 Accounting for just over one tenth of funding volume (KPMG)


8


9

1. Introduction

FinTech in Ireland:

Today in Ireland there are approximately

40,000 people employed within financial

services, and a further 100,000-plus

working within technology5. According

to the IDA and Enterprise Ireland

approximately 8,800 people were

employed in FinTech in Ireland at the end

of 2015, a rise of 7 per cent on a year

before and 40 per cent up on 2008.

While Ireland does not possess a large

domestic market for FinTech services, nor

does it possess the size and institutional

concentration of Financial Services

activity similar to London or the United

States, it does boast a very suitable mix

of IFS and High Technology companies

along with a good entrepreneurial culture

and talent pools, that may enable Ireland

to grow into a strong and well-functioning

eco-system. Furthermore, Ireland post-

Brexit will serve as the EU’s only native

English speaking country. This could be a

key differentiator for Ireland

Temporary disruptions are expected, but

as evidenced by the strong growth of

Ireland’s international financial services

sector during the crisis years of 2009-

20126, sectors that are well positioned

can survive and grow in challenging

economic environments.

5 Irish Times, July 9th 20156 [Cite FSI industry statistics report]

FinTech Globally 24bn 2015 – double the amount from 2014 Total of 650 deals – only a quarter of these in Europe

30

25

20

15

10

5

02013 2014 2015 2016F

USA Europe Asia RoW*

40,000 people employed within financial services.

100,000-plus working within technology.

8,800 people were employed in FinTech in Ireland at the end of 2015, a rise of 7 per cent on a year before and 40 per cent up on 2008.

69 per cent of financial service companies say they are “putting FinTech at the heart of their business”.

47 per cent say they already have a mobile phone app for their products and a further 20 per cent are developing one.

approximately 25 per cent of established financial service providers expect to lose over one fifth of their business to FinTech rivals by 2020.


10 11

1. Introduction

Industry awareness, impact and response:

Financial services both globally and in Ireland are already considering the impacts of

FinTech. According to PwC 69 per cent of financial service companies say they are

“putting FinTech at the heart of their business”. Some 47 per cent say they already have

a mobile phone app for their products and a further 20 per cent are developing one.

However, while many financial institutions are embracing FinTech as an opportunity,

competing players in the marketplace and limited availability of required skills creates

threats to consider. According to a recent PwC report approximately 25 per cent of

established financial service providers expect to lose over one fifth of their business to

FinTech rivals by 2020. According to a recent FSI report both established and FinTech

firms face pressure on skills availability and regulatory knowledge to meet growing

demand.

The FinTech Eco-system:

A well-functioning FinTech eco-system is made up of five key eco-system attributes or

success factors7:

Attributes Description

Talent The availability of technical, Financial Services and entrepreneurial talent

Capital The availability of financial resources for all constituents of the eco-system; start-ups, scaling and established companies

Policy Government policy across FinTech, regulation, tax and sector growth initiatives

Demand End-client demand across consumers, corporates and financial institutions (FIs)

Technology Both emerging and established sources of product development

A strong eco-system acknowledges each of these areas, both in the current marketplace

and in future development planning. Section 3 of this document analyses Ireland’s eco-

system across each of the 5 key attributes or key success factors.

7 Adapted from EY, UK FinTech: On the cutting edge

Figure 2 Ireland’s FinTech “Eco-system” mapped by the “5 attributes”: Talent, Capital, Policy, Demand, Technology.8

FinTech founded on the island of Ireland - Ireland’s FinTech Map v0.5 Dave Anderson 2016

8 Adapted – The FinTech Eco-system, ‘UK FinTech: On the Cutting Edge’, EY 2015

AcademiaEntrepreneurs

Technology Firms

Traditional FI’s

Consumers

Corporates

Government

Regulators

Established

Emerging

IPO Investors

Govt Investment

VC Investors

Talent

CapitalDemand

Technology Policy

FinTech

Attributes

Stakeholders


Making Ireland a FinTech destination of choice.

The key enablers of this vision are Technology, FinTech firms and strong product development capabilities.

The Development of cutting-edge technology;

The Design of great products and solutions; and,

The Growth of globally scalable FinTech firms

1

2

3

12 13

2. Vision for Fintech in Ireland

2. Vision for FinTech in IrelandTo continue the development and enrichment of Ireland’s FinTech eco-system the FPAI

FinTech Strategy Review Team propose that, as a nation, we progress efforts towards

the achievement of the following vision:

Product

A key facet to delivering on our vision will be focusing on the development of products

which solve identifiable business problems or which have a demonstrable business case

to create new value through new opportunities. Innovation must be focused on a tangible

return on investment (ROI) and not “innovation for the sake of innovation”.

The eco-system must facilitate the full breadth of the innovation value chain from

ideation, research, design, build, testing and delivery supported by a broad talent pool

which can bring great product to market. This talent pool will consist of but is not limited

to; technologists, designers, developers, sales professionals, entrepreneurs and other

skills required in a well-functioning eco-system.

An essential component in realising our vision will be that products must be globally

focused in either the B2B (Business to Business) or B2C (Business to Customer) market

so that product can scale beyond the borders of the domestic market (Fenergo are a

good example here)

It will be the keen focus on technologies, product fit and FinTech firms that will enable

Ireland to develop the vibrant, forward thinking eco-system needed to fulfil our vision set

out above.

Technology

It is crucial that there is continued investment and support for research and development

in new and emerging technologies including, but not limited to, payments technology,

RegTech, cognitive analytics, machine learning and blockchain.

A concerted effort is required by third level institutions and industry player’s to form

and enhance partnerships to align research and development with defined industry

challenges and opportunities. This will help foster a safe and competitive eco-system.

It will be paramount that a mixed portfolio of technical innovation, ranging from

immediate to medium term adoption, is progressed to ensure a sustainable future

beyond the current FinTech hype. Our planning will need to be continually scrutinised and

enhanced to make sure we keep in line with the curve of adoption and newly emerging

trends.

FinTech Firms

It will be key to provide a nurturing environment for fledgling start-ups and ambitious

scale-ups underpinned by access to capital and key industry resources including data

sets, sandboxes, industry and regulatory expertise.


14 15

3. The Market Today - Ireland within a Global Market

Realex Payments Founded in 2000

by entrepreneur,

Colm Lyon, Realex

is a payment service

provider which offers

a range of payment

gateway services.

With a yearly

transaction business

in excess of €35

billion and clients

such as Aer Lingus,

Paddy Power & AXA.

A company which

saw exponential

growth since it’s

inception, Realex was

acquired by Global

Payments Inc for

€115m in 2015.

SUCCESS STORY

By facilitating open events and roadshows this will allow Ireland to connect to other eco-

systems and provide a mechanism to help FinTechs scale by marketing capabilities to

international buyers and investors (e.g. venture capital).

An emphasis is required on encouraging and financially supporting firms to develop

their staff, and in particular STEM (Science, Technology, Engineering and Mathematics)

graduates, through education programmes which ensure high levels of professionalism,

competence, understanding of the financial services industry and how to grow and

develop international businesses.

Finally, market players in established industries, such as banking and fund management/

services, and key stakeholders, for example the regulator, should be encouraged

and facilitated to embrace the eco-system. Mentor programmes, innovation labs and

co-working spaces will be crucial in facilitating the engagement between new and

established players and moreover in igniting the processes of new value creation which

will ultimately result in increased competitiveness and reputation for Ireland.

3: The Market Today – Ireland within a Global Market

Global Industry - A global growth story where Europe can achieve more

Last year FinTech start-ups, broadly defined, attracted $24 billion in Venture Capital

Funding worldwide9. This doubling of investment on 2014 encompassed approximately

650 deals of which just over one fifth10 took place in Europe. While investment saw

somewhat of a decrease in the latter half of 2015 and while also not immune from

financial shocks or economic cycles, this volume of activity reflects not just the impact

of a recent global recovery, but a deeper structural and more lasting shift towards new

disruptive technologies.

9 The Pulse of FinTech 2015 in Review, a Global Analysis of FinTech Venture Funding KPMG, 201610 Accounting for just over one tenth of funding volume (KPMG)

Within Europe, the UK performs most strongly in terms

of growth and activity (for instance despite a healthy start

up culture11 Germany is significantly outpaced by the UK

by a factor of 412) While only time will tell, it is not beyond

the realms of possibility to suggest the UK’s exit from the

EU is likely to be adverse for London’s future strength.

Outside of the EU, Asian FinTechs last year attracted

more than double the number of $50 million plus deals

than their European counterparts13. Corporates have

played a particularly big role in FinTech investment in Asia.

Already an interesting result reveals itself: Despite being

the world’s largest market for financial services, Europe

is – due to a relatively weaker technological capacity

and a more fragmented regulatory and industry terrain

– dwarfed by the United States and in terms of recent

growth is being surpassed by Asia. For Ireland, we must

leverage our strong links with the US and our fledgling

growth in Asia to diversify beyond Europe and to ensure

sustainable growth irrespective of events such as Brexit.

However, the German model – slower growth but more

vibrant start-up activity – also offers lessons. Ireland’s

relatively small size as a domestic market and also as an

international financial services location points to a blended

compromise between corporate driven activity and start-

up activity, a model best based on collaboration.

The geographic distribution of opportunity for Ireland

along this spectrum shows interesting geographic

patterns. Due to demographic (in terms of growth)

and technological (in terms of rapid take up of smart

technology) growth, Asia presents perhaps the greatest

potential for sustained long term growth in the B2C

(Business to Customer) sector, especially in online

banking, payments and lending. In more developed

economies, the strongest potential may exist in new

Business-to-Business technologies, particularly

blockchain and data analytics.

11 According to one recent survey Germany was identified as the world’s best country for Start-Ups (Reibstein, D, Wharton, BAV consulting and US News and World Report, 2016)

12 In 2015 British FinTech firms attracted 398% of equivalent German funding (KPMG, 2016)

13 KPMG 2016


16 17


Historically, Irish companies in other industries have

clearly demonstrated Ireland’s potential for success in

Asia, most notably the likes of Kerry Group and Diageo

in the food and beverage industry. The opportunity to

develop closer relations with Asian Financial Institutions –

availing of Team Ireland’s rich network of contacts, local

knowledge and trust – is also tantalising14.

At the opposite end, the B2B sector arguably offers the

greater growth possibilities in developed economies. The

success of funding deals in Big Data analytics in the UK

suggests that, despite some overall moderation in the

pace of funding activity over the turn of the year, activity

in this space is gathering pace. Somewhere in the middle

of this spectrum are examples where FinTech is blurring

the boundaries between previously distinct sectors.

Boundaries between insurance and retail investment

products, for instance, may become harder to sustain

with implications for both distribution and the competitive

environment.

Cutting across all parts of this spectrum is a third

dimension: The extent to which activity is regulated. In

the B2C area of banking and payments transfer there is

a stark difference between large established players and

newer entrants in the EU. On the one hand, established

players are plagued by strict regulatory scrutiny, whereas

on the other, new entrants have been seen to engage

in regulatory arbitrage to compete on a playing field that

established players would see as uneven. Beyond this

area of the spectrum are areas of activity that are as

yet largely or only partly regulated, such as blockchain,

robotic advisory and big data analytics.

As well as challenges, the regulatory dimension offers

opportunities with the “RegTech” industry in Ireland given

its position and ability to leverage Ireland’s hard won

reputation for sound financial regulation using centres of

high quality research such as the Government Risk and

Compliance Technology Centre and capitalising on a large

14 See “Emerging Technology in Financial Services, The View from Asia”, Mulligan / Thomson Reuters-PWC

capability pool within our existing financial

services back-office population.

Analysis of key Success Factors within a Global context

Talent, Skills & Education

According to the IDA and Enterprise Ireland,

some 8,800 persons now work in their FinTech

portfolio, and this number is consistently

growing15. However, the FinTech phenomenon

also poses a challenge to many existing jobs.

The rise of robo-analytics, greater use of online

payment technologies and non-bank lending

are just three areas that invariably challenge

us to ensure that all of those working in the

financial services sector currently are informed

and prepared. Ireland’s national skills strategy

is a fantastic step forward to ensuring we are

creating the talent of the future.

Changes in work culture will also be needed.

The Gartner group has predicted that 20 per

cent of workers will in the future have robo

managers.

As interaction between consumers of financial

services and their providers becomes

increasingly virtual – and as business to

business relationships become increasingly

influenced by a new wave of FinTech services

– consumer and business legal relations,

regulatory frameworks, psychology and ways

of doing business – will all have to adapt

accordingly.

As well as training staff in finance and

technology, training in entrepreneurship,

15 Silicon Republic, 18th April 2016

Linked finance Launched in 2013,

Linked Finance

are Ireland’s first

and largest P2P

lending platform.

Using technology

to cut out the

middle man, Linked

Finance connects

businesses in need

with ordinary lenders,

giving Irish SMEs a

viable alternative to

traditional forms of

lending. To date over

€4.5million has been

repaid and service has

supported over 3,200

Irish jobs.

SUCCESS STORY

Fenergo Fenergo is an award-

winning FinTech

Company that

develops world-class

lifecycle management

software solutions

for investment banks

and capital market

firms. With operations

across Europe,

North America &

Asia Pacific, they are

developing a truly

global footprint. This

expansion will be

greatly aided after

a recent funding

round of $75million

from Insight Venture

Partners.

SUCCESS STORY


18 19


design, innovation and organizational change and

business culture will help advance the FinTech industry.

Ireland has a strong FinTech talent pool, a well-regarded

educational system, a large diaspora with a potential

to provide high quality returning emigrants, access to

world leading technology firms (IDA source) and a good

entrepreneurial environment. However, ensuring we have

the right FinTech talent with the right skillsets will be a key

factor for future growth16

From a financial services expertise perspective, the US

and UK stand out. In terms of sheer scale they have

access to a large pool of Financial Services expertise with

more than 1 million (reference EY report) employed in

each of the sectors.

Ireland has circa 40,000 people employed within financial

services. There are a further circa 100,000-plus working

within technology17). While we cannot compete on scale,

efforts to cultivate a home-grown talent pipeline could, if

combined with attracting and retaining key foreign talent,

still create niche areas of success.

Singapore’s small size has not prevented it from attracting

and retaining foreign talent through an attractive tax

regime, a supportive immigration system for skilled

workers and a good regulatory climate and English

speaking environment. Ireland shares many of Singapore’s

attributes but we can do more to retain foreign skilled

talent and focus on support for those from outside of the

EU.

The Global Entrepreneurship Index (GEI, 2016)

benchmarks ranks Ireland 12th on entrepreneurship,

comparable to peer countries included in our comparison

below: US (1st), UK (9th), France (10th), Singapore (11th),

Netherlands, (13th), Germany (14th), Israel (21st), India

(98th).

Third level institutions will be critical in improving the

supply of future talent to the industry as it grows

16 Financial Services Ireland / Accenture “A skills needs analysis of the International Financial Services Centre in Ireland”

17 Irish Times, July 9th 2015

FinTech18. Good progress is being made in

this respect in Ireland. Notable developments

are – State Street Advanced Technology

Centre with University College Cork (UCC)

and Zhejiang University (ZJU); the FinTech

Masters programme launched by the National

College of Ireland; Government Technology

Bridge Programme (NCI); IFS Apprenticeship

Initiative, various Applied Investment Courses,

Financial Crime prevention modules and more.

Moreover, Ireland and the eco-system has

welcomed the establishment of initiatives

at industry level to advance fintech and

the emergence of disruptive technologies.

Examples include Irish Funds FinTech Working

Group and the IDA Chaired Industry Blockchain

Expert Group.

In developing Ireland’s offering here, inspiration

should be taken from global sources of

excellence such as Israel (ranked 1st in the

world for R&D investment19 and the UK with

initiatives such as FinTech 101, a FinTech

e-learning course offered at The Open University

in collaboration with Innovate Finance.

The main skills needed to thrive in a FinTech

company; coding ability, analytical thinking,

business acumen; are all synonymous with top

STEM graduates. STEM education also needs

continued focus in terms of both the quality of

delivery but also diversity of participation. Only

one quarter of people employed within STEM

careers are women20). With the high demand

for graduates in these areas this should be a

real area of focus for Ireland. The ‘Women and

girls in STEM week’ in California is an example

of government initiatives in this space.

18 EY “Landscaping UK FinTech”19 Deloitte (2016) Israel a hotspot for Blockchain innovation20 Silicon Republic, 13 January 2016

AQ Metrics

AQMetrics provide a

range of integrated

capital markets

surveillance and

compliance solutions

for alternative

investment

management and

broker/dealer

companies. Their

innovative cloud

based platform

integrates pricing,

risk and regulatory

solutions to provide

support for a host

of global regulatory

reports such as

MAD II, MiFID II

and AIFMD. Based

in Maynooth, the

company recently

secured $3.25m in

funding which will see

them expand their

services to the US.

SUCCESS STORY

Currency Fair Established in 2009,

Currency Fair is an

online peer-to-peer

currency exchange

market place.

Described as an

‘online dating bureau’

for people who

want to exchange

money and avoid

large bank fees, they

have experienced

great growth since

2009, with over

18 currencies now

supported on their

platform. Their

business model,

which sees them only

charge between 0.5-

0.15% per exchange,

has seen them

process over €2.5

billion to date, with no

signs of letting up.

SUCCESS STORY


20 21


Capital – Launchpads, Seed Capital and the availability of VC

The intensive nature of capital and the need for FinTech firms to achieve scale in order

to be profitable make funding a key issue. The very early stage of development is

particularly important. In the US, Business Development Corporations (BDC) have been

an essential part in scaling up FinTech firms. Likewise, the US boasts the world’s best

environment for Venture Capital.

In Britain, strong incubators and a similarly efficient market for start-up and development

capital and the Enterprise Investment Scheme (EIS) have all contributed to the world’s

leading FinTech industry. In Ireland Enterprise Ireland has made a welcome start with its

Competitive Start Fund.

New incubators such as the NDRC Launchpad, Accenture FinTech labs and the

MasterCard Start Path accelerator are also promising. To match the funding capacity

available to its peer countries, however, Ireland needs to make a significant step up.

Measures to improve the design and relevance of our taxation system to ensuring the

sustainability of start-ups in the forthcoming budget would be a welcome continuation

of the start made in the last budget in relation to Capital Gains Tax, tax reliefs and the

Knowledge Development Box. The influence of EU rules on state aid are a particular

issue to be considered in terms of enabling Ireland to improve its attractiveness vis a vis

the US in this regard. Supporting progress towards a comprehensive Trade In Services

Agreement (TISA) is also an area where Ireland can take a lead, leveraging its links to the

US and reputation in the EU.

Ireland has a good network of seed support for FinTech start-ups in the form of

incubators and accelerator programmes. Nonetheless, there may be a challenge in

relation to attracting the same levels of venture capital investment as other European

countries.

According to studies by EY21, financial centres of gravity such as the UK (c.€680m in

2015 and Germany (c.€500m in 2015) as expected attract the lion’s share of investment

in Europe but significant investment is seen in other competitor countries also, such

as Sweden (c.€240m in 2014 and the Netherlands c. €306m. To give some context,

the total amount of VC in Ireland for FinTech in 2015 is estimated by KPMG22 at €75m,

which is a stark reminder of the lengths still go in achieving parity with our European

neighbours. Furthermore, all of this is dwarfed by the c. €1.8b and c. €4.6b invested in

New York and California respectively in 2015. Enterprise Ireland is the primary source of

growth funding for indigenous FinTech firms in Ireland and they have made 15 separate

equity investments in FinTech and IFS High Potential Start-Ups in 2014-2015. These

investments were across a broad spectrum - RegTech, Alternative Investment Fund

21 EY benchmarking UK FinTech report. Note that other reports may cite different figures. These may arise from differences in periodicity, definition or methodology of calculation.

22 KPMG, ‘Venture-backed FinTech start-ups strengthen in 2015’, 15 Mach 2016

Management, Non-bank lending, stock market investment tools and payments solutions.

New incubators such as the NDRC Launchpad, Accenture FinTech Labs, and the

MasterCard Start Path are helping to build a pipeline for future FinTech and IFS

innovators. A number of large multinational Financial Services companies such as Citi

and Ulster Bank, AIB and Bank of Ireland have begun to engage with FinTech innovators

through the provision of start-up space and mentoring, e.g. Citi Labs incubator space

and Ulster Bank’s support for Dogpatch labs.

These programmes, and a new willingness by large financial institutions to open their

doors and work closely with small innovative FinTech disruptors, will further drive up the

number of FinTech start-ups over the coming years.

Enterprise Ireland23 recently launched a Competitive Start Fund aimed exclusively

at FinTech start-ups. This is a €500,000 fund with the intention to invest in 10 new

companies, so that they can have the resources and capital required to execute their

business plan and reach commerciality.

In addition the IDA through their efforts are attracting firms to Ireland who are growing

their fintech and innovation footprints in-country. This evidenced through work being

done by Fidelity in Galway and Pramerica in Letterkenny

Technology Centres are another avenue for engagement for both start-ups and

established companies in the FinTech space. The Governance Risk and Compliance

Technology Centre based in UCC is a dedicated research resource in the FinTech space;

while other Technology Centres focus on key areas that can be leveraged by the FinTech

sector, such as Data Analytics and Mobile Solutions. More needs to be done to increase

the proportion of Government investment directed at FinTech investment in Ireland and

to attract investment from foreign venture capital funds. In addition, while FinTech is an

important element in several technology centres there is not yet one dedicated entirely to

FinTech. This is something we feel should be rectified.

Public Policy - Regulation, Tax & Fostering Innovation

Ireland has to date faced a very different regulatory approach to FinTech than prevails in

the UK, Singapore and other important FinTech jurisdictions. The recent advancement

of FinTech policy in the UK illustrates, together with the British approach of enabling

“sandbox” regulation for start-ups, why their FinTech industry is a world leader. The very

competitive nature of the industry and the considerable opportunities for Ireland mean

that this avenue should be explored in Ireland and is recommended by this report, also

recognising the importance of balancing a competitive regulation regime with appropriate

consumer protection

23 Enterprise Ireland, ‘New €500,000 Enterprise Ireland fund to support FinTech start-ups’ 26 May 2016


22 23


While the financial crisis produced an understandable reaction on the part of our

regulatory culture, the time has now come to revisit that culture in a positive manner that

embraces rapid technological change. Otherwise Ireland will not only be left behind in

terms of the FinTech industry’s growth potential, but our citizenry and business sector will

suffer due to the lack of B2C and B2B services that maximize efficiency, productivity and

economic growth.

If our Regulatory policy cannot explicitly follow in the footsteps of the FCA’s mandate to

promote growth in the FinTech sector then at least it can develop clearer understanding

of how its existing mandate can be interpreted in a manner that does not impede growth.

Improving the speed and efficiency with which new firms are licensed is particularly vital

if Ireland is to foster new high value added export oriented businesses and to maintain

its excellence in attracting Foreign Direct Investment. At an EU level regulation of

payments, Know Your Customer, Anti Money Laundering, Solvency II and Digital Identity,

Cybersecurity and Data protection need to be developed to ensure a balance between

stability and giving Europe and fair chance to compete and benefit from this vital industry.

An integrated look at the cross border potential of FinTech to promote growth and

employment and better choice for consumers and investors across the EU should aim to

remove unnecessary borders to growth and fusion between the different member states

of the EU. Also in the wake of the recent EU ruling on the Safe Harbour agreement,

clarity will be needed on what will replace it if data protection concerns are to be

addressed in relation to EU US trade. Finally, in that regard progress towards Trade in

Service Agreement should be integrated with efforts in relation to regulation.

From our research, it is areas such as taxation, the costs of doing business and the

general level of regulation in Ireland’s business environment are ones where competing

jurisdictions are relatively attractive to FinTech start-ups. Equal progress needs to be

made in terms of improving both the non-regulatory and regulatory environment. The

departure of the UK from the EU makes a defence of such advantages that we do enjoy

in relation to our taxation system and an also a significant and ongoing improvement

in our broader competitive environment more necessary than ever. This is not to deny

that good progress had been made in general with regard to government policy across

regulation, tax and growth initiatives. But much more needs to be done. And it needs to

be done more quickly than before if the offering of Ireland to talented entrepreneurs and

investors is to match that of the UK, Singapore and others.

Good access to Government, demonstrated by the Government Bodies’ support

of the FPAI working group, is a good and relative competitive advantage for Ireland.

Government funding through EI and educational programmes (such as the technology

bridge programme offered by the NCI) is also positive. However, given the crucial need

to incentivise start-up and scaling companies, Ireland’s relatively low Corporation Tax

Rate vis a vis the EU – so fundamental to attracting large technology companies – is

insufficient for a new strategy of attracting entrepreneurs and start-ups for whom our

rates of personal income tax – and the manner in which capital allowances work – remain

relatively unfavourable. Having said this, recent changes in this area are promising, but

need to go further.

Finally, in relation to regulation the UK regulator is considered particularly progressive

regarding innovation and driving competition. The PSR (Payments Services Regulator)24

was established in April 2015 by the FCA with statutory remit to promote innovation

and competition. It also provides a “regulatory sandbox”, an environment for financial

companies to test new products safely. Singapore is seen as being increasingly

progressive in this respect.

The establishment of the FinTech & Innovation Group (FTIG) in 2015 with responsibility

for creating strategies and regulatory policies regarding technology innovation was also

noteworthy. Also, the Financial Sector Technology and Innovation Scheme (FSTI)25 (2015)

have committed c. £100 m over next five years to fund innovation labs and industry wide

initiatives. We see positive moves also in France where the French banking supervisory

authority and the country’s securities regulator are setting up dedicated FinTech teams

with a joint remit to work with FinTech start-ups.

So in summary on policy, while Ireland is making moves in the right direction, improving

the regulatory environment, tax rates and reliefs for entrepreneurs and the introduction of

‘regulatory sandboxes’ as seen in the UK are needed for Ireland to fully exploit its large

underlying FinTech potential in a post Brexit environment.

Consumer Demand

After an initial reticence born of inertia, more and more consumers of financial services

products in the developed world are beginning to adopt products and services which

are; faster, cheaper, more integrated, add more value and are more innovative. This

phenomenon is made available by smart mobile technology. In Developing countries,

particularly in Asia, there is no inertia problem as hundreds of millions of consumers

are already by-passing old technologies and systems and are experiencing their first

encounter with financial services through the most up to date media.

This is both a challenge and an opportunity. A challenge being that it quickens the

rate at which Europe must adapt. It is a clear opportunity due to the fact, that in Asia

alone, 3 billion consumers are entering the market for financial services using media

and technologies that enable their needs to be met, in principle, by Irish providers. As

for demand in Ireland, this is primarily driven by the domestic consumer market and the

global asset servicing market, which has a large presence here. The challenge for the

domestic market is that, of itself, it is not large enough (unlike the UK and the US) to

24 Financial Conduct Authority, New Payment Systems Regulator sets out how it will regulate the £75 trillion industry that underpins UK’s everyday financial activity, 13 November 2014

25 EY, UK FinTech: On the cutting edge. An evaluation of the international FinTech sector


24 25


fully sustain a domestically focused FinTech market. As a nation, the strategy must be

to develop globally scalable products for larger consumer markets. This has been the

approach adopted by other jurisdictions with smaller consumer markets like Sweden and

Israel where products are very much designed for export purposes.

Two strategies that may be very helpful here are better use of eGovernment and the

idea of Smart cities. In Estonia26, the government has pioneered e-Identity for its citizens

and in other Nordic/Baltic countries, the state uses its strategic position as a potential

technology leader to encourage e-Payments in public procurement and the development

of Smart city approaches to promoting better technology take up by citizens and

business. The appointment of a new Minister of State for Financial Services was not just

welcome in itself, but noteworthy also was how the briefs of eGovernment and Public

Procurement were added to his portfolio. This combination is a great opportunity to

make Ireland a leader in government FinTech.

The investment fund services side is witnessing the emergence of specialist RegTech

solutions from Ireland. Firms like FundRecs, Tradeflow, AQMetrics and others have found

a strong niche in that regulatory budgets are available; compliance managers are in

procurement mode and the asset / fund servicing industry scales globally. Finally, we do

not see that same adoption in Ireland of FinTech by millennials for savings and investment

products like that in Hong Kong and Singapore. Perhaps this is due to lower levels of

disposable income due to higher levels of personal taxation and rising rents affecting

many in this sector. If these areas were addressed, there may be uplift in these sectors.

Technology

Developing a clear understanding of successive waves of innovation and how they

are impacting on consumer psychology and behaviour will assist industry in spotting

opportunities and overcoming barriers (such as, for instance, the strong residual desire

and sometimes need for face to face contact in certain financial transactions). As

regulators improve the interoperability and transparency of EU wide financial regulations,

technology can improve the ability of Application Programming Interface technology to

safeguard and validate digital identity in a manner conducive to cross border trade. At

the same time, our national FinTech strategy must aim to cultivate indigenous clusters of

technological advantage. Ireland’s payment eco-system shows this can be done. Other

exciting areas of technological advance are emerging: Both the Government Centre for

Risk and Compliance Technology and the centre for Financial Innovation in UCC are

making significant progress in technologies could have the capacity to feed world leading

companies. TCD and DCU are also developing exciting areas of research in this field.

26 e-Estonia, Electronic Digital Card

The size of players in the market in Ireland is, however, an obstacle to this. For this

reason, a strategy of collaboration between start-ups and larger players – players with

the resources to collaborate with third level institutions – should be a key underpinning of

Ireland’s FinTech advantage. Ireland is fortunate to have attracted a large concentration

of global firms to her shores e.g. Apple, Google, Facebook. This is undoubtedly providing

ingredients for a strong eco-system and a reputation for technical delivery. With this in

mind, we have seen the emergence of payments technology, RegTech and blockchain as

specialist areas.

Technological areas of focus from our third level institutions is an important component of

innovation and startup activity. We are seeing this through home grown startups, as well

as established multi nationals working closely with the third level institutions. For FinTech

related areas, our areas of interest include cybersecurity, cryptography, distributed

computing, machine learning and artificial intelligence.

One interesting point to note is that despite many social media firms being located here

we have not seen a major uptake or growth of peer to peer social platforms, save for two

alternative financing companies. Another interesting trend globally is that of specialist

exporters, this is particularly true of Israel in the cyber space. With this in mind, it may be

advantageous for Ireland to focus on niche areas of technology where there is no clear

global leader and to emerge as a centre of excellence. A technology that might fit this

category is blockchain given that many of the early bitcoin developers were based in

Dublin. Finally, one cannot overstate the importance of analytics and data capabilities for

economies of the future, the universities will be key to developing this capability and must

be supported at government level to help grow and develop STEM graduates.

In summary, in terms of Ireland’s generic readiness for FinTech excellence we score well

on skills. Some of the challenges that need attention include improving the early stage

funding environment, addressing operating environment issues (office space, technology

centres with a greater FinTech focus and the adaptation of the regulatory system to

industry change. Ireland has a good incubational infrastructure. Policy change can build

on this by improving the education system’s focus on STEM, finance and technology,

building into our tax system a greater incentive to engage in Angel funding and

supporting the retention of engineers. At the same time, government can raise Ireland’s

FinTech game via eGovernment, public procurement and smart cities. Finally targeted

business led investment is needed in third level R&D.


26 27

4. Underlying Technologies

Jurisdiction Analysis

Ireland within a global industry

Ireland has good reasons to see FinTech as an industry where it can provide the same quality of

world leadership as provided by other small nations like Singapore and Israel, provided careful

thinking goes into the preparation and positioning of Ireland’s FinTech offering.

4: Underlying Technologies

Future Focus of the FinTech Sector

With the success stories such as the €115m sale of Realex Payments and the €75m

investment in Fenergo, the future of FinTech in Ireland looks bright. However, what is still

unclear, is what areas will prove to be most fruitful going forward.

A recent study27 by Deloitte shows the particular sectors areas where transformation is

likely to be most strongly felt:

Figure 5 the Impact of Disruption

From Deloitte’s analysis, it is evident that disruption will be wide-ranging and varied.

However, despite the breadth of change, four technologies or trends emerge as key

disruptors or viewed more positively as the areas central to the future economy and the

financial services landscape. These are:

1. Big data – the ability to process large complex unstructured data sets and monetise data assets into business environments

27 Deloitte – Waves of Disruption 2016

UK: • Global financial hub with a wealth of talent and

expertise • Supportive and progressive government and regulatory

regime• Effective FinTech network, including a bridge with

Singapore

USA: • Very strong STEM workforce, especially on

west coast• The best funding on a global level, and the most

consumer and FI adoption of any country

Germany: • Fast growing and dynamic market with

increasing activity in InvesTech in increasing years

The Netherlands: • English is de facto a second language• Asia ties, due to old colonial history• High and increasing share of entrepreneurs, and strong

development of start-up hubs

Israel: • Highest density for start-ups per capita in the

world• World-leading tech talent and entrepreneurial can-do

attitude• Supportive policy environment for start-ups and tech

companies• Well-connected diaspora supporting investment

Singapore: • Preferred gateway into Asian market • Supportive regulatory environment• Strong local and innovative banks

Sweden: • Strong start-up ecosystem - five unicorns

produced • Community of high-tech early adopters• Strong government and social security

France: • Supportive regulatory environment emerging• FinTech start-ups can benefit from being

situated close to large global companies and potential clients within Paris

Hong Kong: • Very accessible due to wide use of the English

language, and its legal framework (Common Law) • Simple and low tax system (17% income tax)

Ireland's Competitive Advantage

✔ An Island nation - Ireland has achieved success in the export of high value products (ICT, pharma and medtech) - FinTech takes this strategy to a higher level, offering even faster growth in high value added services

✔ Positive reputation in EU, US and globally - Our presence in the EU is essential and Ireland is well positioned to develop partnerships, leveraging Team Ireland (the IDA, Enterprise Ireland and Ireland’s diplomatic networks) to tap into rapidly growing markets (India, China, Indonesia for example)

✔ Strong entrepreneurial culture - With a quarter of a million small and medium sized firms, Ireland’s entrepreneurial culture is strong and increasingly well supported by government . Ranked within top 10 on the 2017 Global Entrepreneurship index (GED)

✔ Unique blend of world leading Technology and IFS firms - Ireland is the global technology hub of choice, with 9 of the world’s top 10 technology companies located here and one of Europe’s leading locations for financial services


28 29

5. Ireland’s Competitive Advantage

2. Machine learning/AI - programmed Intelligence exhibited by machines - machine learning is the next level of improved performance from analysing prior experience and the robotisation of work processes.

3. Blockchain – a community based network which facilitates the safe exchange of data & information. Creation of secured datasets has the potential to transform the financial services value chain.

4. Digitisation of the core activities of financial services. This will see manual information and processes being transformed into digitally enabled data and capabilities.

The key will be to identify use cases within the financial services value chains which are

best suited to such technologies or where these technologies can add or create most

value. It is important for executives to remember that these disruptive technologies

are not a panacea, they must be judged on their merits for each use case. Ultimately

technologies will only serve as an enabler.

Ireland’s success will ultimately rest on the eco-systems ability to create great product,

which the world’s financial services players will want to procure. The main challenge that

will be presented will be the ability to successfully cultivate an eco-system which will see

established players work with FinTechs to provide innovative services to clients, which

will greatly enhance their user experience. While this may seem a simple ask, the ability

to provide this will be a good litmus test of Government success toward the IFS2020

goal.

Finally the challenge presented by the digitization of core activities of financial

services needs to be put in the context of the high national priority in relation to

maintaining financial stability. This points to the importance of a collaborative approach,

one that steers a middle path between a “Do nothing” approach of simply allowing

market transformation to happen with no guidance and a dirigisme approach that might

stifle change.

As noted above Ireland does not possess a large domestic market for FinTech services.

Nor does it possess the size and institutional concentration of financial services activity

that exists in London or the East and West coast of the United States. However, it does

boast a very suitable mix of IFS and High Technology companies along with a good

entrepreneurial culture and a good track record of support for the former (by the IDA) and

the latter (by Enterprise Ireland). This balance between strong and large multinationals

and domestic institutions on one hand and a vibrant start-up culture on the other points

to collaboration between both as the optimal strategy for Ireland.

5: Ireland’s Competitive Advantage

Earlier analysis looks at where Ireland currently is in FinTech. This chapter asks whether

that positioning is where we should be. The difference between a FinTech eco-system

that has evolved over time and one, which is successfully driven by well-designed

strategy and government policy, is the difference between an industry that is getting by

and one that is leading the world.

Thankfully Ireland has good reasons to see FinTech as an industry where it can provide

the same quality of world leadership as provided by other small nations like Singapore

and Israel, provided careful thinking goes into the preparation and positioning of Ireland’s

FinTech offering.

An island nation

Ireland has a strategic need to develop internationally traded services industries that can,

more easily than traded goods, traverse borders quickly and achieve rapid value driven

growth. Accordingly, that Ireland’s merchandise export success has so far focused on

light high value added goods (e.g. ICT, pharma and medtech) reflects our island status.

FinTech takes this strategy to a higher level, offering even faster growth in high value

added services.

A positive reputation in the EU, US and Rest of the World

Ireland’s renewed reputation for financial soundness – hard won in recent years - gives

it solid foundations in an industry where reputation for sound regulation security and

prudence is essential. Our presence in the EU is now also essential.

More widely Ireland’s traditional policy of friendly relations towards developing nations

creates a very exciting prospect: Namely that in rapidly emerging and very large markets

– India, China and Indonesia for example – Ireland stands well positioned to develop

partnerships, leveraging Team Ireland (the IDA, Enterprise Ireland and Ireland’s diplomatic

networks), to tap into rapidly growing markets for the provision of financial services on

new platforms. The rapid take up of smart technology and rising income levels make

Asian markets particularly attractive in this regard. Ireland’s open economy and excellent


30 31

5. Ireland’s Competitive Advantage

ability to engage with different business cultures also give us an advantage in creating

understandings with other FinTech clusters. This means healthy competition goes hand

in hand with the possibility to create axes of collaboration, most obviously with London.

Ireland’s relationship with the US is also key and it is of significant importance to continue

to attract the world’s leading technology companies like Google, Apple and Facebook

with their global customer base. These companies are essential elements of Ireland’s

FinTech eco-system, bringing expertise and helping to making Ireland very attractive as a

place to develop and scale products.

A good entrepreneurial culture

With a quarter of a million small and medium sized firms, Ireland’s entrepreneurial culture

is strong and increasingly well supported by government. There is further to go in terms

of adjusting our tax policies, cost base and regulatory framework to help our SME sector.

But the climate and attitude is a positive start to begin progress on this front. Ireland’s

large pool of talented young people can, if complemented by the right provision of skills

and entrepreneurial training, feed Ireland’s FinTech industry with high potential startups.

The challenge will be to raise the rate of survival of these start-ups and to retain those

that succeed in Ireland.

A unique blend of world class Computer Software Technology firms and IFS firms

While some countries can boast excellence in IFS clusters and others can boast the

presence of high concentrations of high quality information technology, few countries can

match Ireland’s unique blend of both. Created separately by the excellent work of the IDA

and Enterprise Ireland over several decades, the potential to fuse these two industries

into a new frontier of world leadership is a very exciting one.

A need for stability in our financial institutions

The need to preserve financial stability in Ireland is well understood by all stakeholders.

FinTech can of its nature be disruptive of established institutions. At the same time,

start-ups in Ireland face a small domestic market and a consequent difficulty in achieving

scale. Calling on its traditions of partnership between public and private sector and

its flexible ability to adapt as a small country, Ireland is in a good position to pioneer

successful models of collaboration between incumbents and start-ups to ensure the

transition to a new financial services environment is as smooth as possible. As well

as targeting jobs growth, a FinTech strategy must address the need for reskilling in

the financial services industry where this is needed to protect workers from disruptive

technological change.

Regulatory environment at national and EU level

Ireland must not surrender the hard won restoration of its financial reputation. It can

neither stand still, nor ignore emerging differences in the regulatory and licensing regimes

faced by FinTech industries in competing jurisdictions. At an EU level, regulation and its

technical implementation must also create a level and transparent playing field that can

benefit citizens seeking cheaper and more efficient financial services, SMEs seeking

funding and savers institutional investors and pensioners seeking new opportunities.

Ireland’s reputation as a committed member of the EU puts it in a good position to

achieve progress in this area.

In summary, Ireland has as an island nation the need to develop high value added

internationally traded services markets if it is to complement its success in by generating

more home grown successful start-ups and scale them to success. In doing so, it has

the advantages of being the only English speaking country that is in the EU along with

excellent trading links with the US and developing links with Asia. It also has a good pool

of IT and financial services skills that, if not as large as in big hubs like London, may be

nonetheless more easily manoeuvrable into key areas of niche advantage.

At the same time, it faces two important challenges: Competing centres of FinTech such

as London, Israel the US and Asia enjoy regulatory systems that are arguably more

growth focused than in the EU. Secondly, there is the challenge for Ireland to maintain its

hard won reputation for stability in its financial sector.

The role of government in domestic political institutions is also likely to place a high

priority on ensuring that existing jobs in domestic institutions are protected from

excessive disruption. These two considerations have two related implications:

Firstly both government and the regulator will – in consultation with industry - need to

modernize Ireland’s regulatory environment and work at EU level to ensure that the EU’s

approach to regulating FinTech is based on promoting growth and modernization of

financial services across the EU, better access to SME funding for Europe’s job creators

and better consumer choice for retail banking customers, savers and investors.

Secondly, that training in skills, technology and change management is encourage in

incumbent institutions to ensure that transformative technologies empower workers

rather than displace them.

While the foregoing analysis gives useful pointers to the broad direction of a successful

FinTech strategy, a full detailed FinTech strategy must outline key sectors where Ireland

can advance towards world leadership in selected areas of potential excellence.

Identifying these sectors in more detail will also help build collaborative strategies

between the new target industries and the most appropriate incumbent industry partner.

32


33

6. Key Recommendations & Priorities for Ireland

6: Key Recommendations & Priorities for Ireland

This section strongly reflects the foregoing chapter’s emphasis of the need for a greater

support and collaboration within the entire eco-system. The recommendations are listed

in order of Eco-System, Talent, Capital, Policy, Demand and Technology

A Stronger FinTech Eco-system

The case for establishing a strong

FinTech eco-system, one that is well

supported and encourages collaboration

between all constituents has never been

more compelling. Start-up’s, scaling,

indigenous and MNC’s are all looking

to achieve the same goal; build great

products for their customers. Given the

level of disruption across the FinTech

space one’s ability to build products,

great businesses that can satisfy a global

appetite requires different thinking, or at

least requires one to branch outside the

usual paradigm. Ireland, given it is a small

island nation has a natural advantage

over most and so our ability to create

a highly functioning eco-system is well

within our abilities and grasp.

The term eco-system is an obtuse term

and can mean many things to many

people depending on which part of the

system you are focused. It’s important

that Ireland looks to break-down this term

into something more tangible, allowing

the different constituents to better engage

and contribute to the overall eco-system.

The core of this strategy is to improve

Ireland’s ability to support and enable

businesses to build better products

and ultimately better businesses. The

schematic below is a representation of

the key building blocks and constituents

involved in this.

Ireland needs to balance its aspirations

to do great things in the FinTech space

with a healthy dose of common sense,

leveraging its current strengths to best

support its aspirations:

• Leverage Ireland’s USP as being a

small, globally connected and creative

people

• Play to our strengths; Exporter of

services and capabilities

• Be known as a great place to build

and incubate/new product for the

export market

• Emphasising Ireland as a crucial

Product solution to global FinTech

enterprises with the slogan ‘Have

Ireland in your toolkit!’

Research Design Build Test Export

Pre Start-up

Start-up

Scaling

Indigenous

MNC

Talent

Capital

Policy

Demand

Technology

Eco-system

• Leverage the Irish international diaspora

and network with support from key

international FinTech ambassadors to drive

opportunities into Ireland

• Enhance and develop our capabilities

around the core Product Development

lifecycle, thereby maximising the

opportunity for all constituents (nationally

and internationally) of the FinTech eco-

system to engage and contribute to its

success e.g. pre-start-up, start-ups,

scaling, indigenous and MNC’s

Improving the FinTech eco-system and

collaboration across this is a key requirements

of all constituents, both public and private.

There are a number of activities that can

accelerate its development. These activities are

centred on promoting growth across the eco-

system through increased collaboration both

domestically and internationally.

FinTech’s Talent pipeline of the Future

Improving the underlying attractiveness and

pipeline of talent into the FinTech sectors

is a key current and future requirement for

the country and the financial sector. The

availability of appropriately skilled talent is

essential for growth of the FinTech sector.

Additional measures can increase the

availability of multi-disciplinary talent in Ireland

as well acting as increasing the attractiveness

of Ireland as a location for this talent.

Eco-system Support & Collaboration

• Establishment of a FinTech Advisory Panel under the FinTech and Payments Association of Ireland

• Set-up of a Corporate Alliance Programme

• Installation of FinTech Ambassadors in key markets

• Better connect Ireland’s FinTech landscape through physical and virtual locations

FinTech’s Talent pipeline of the Future

• Develop a world class skills program with the Dept. of Education

• Promote greater gender diversity through educational channels and targeted events and initiatives

• Improve success rates of our start-ups


3534

Financial Technology / Regulator engagement model of the future

Balancing consumers protection and

prudential stability with the needs of innovation

will be a key pillar in the future success model

of Ireland’s FinTech sector. A regulatory

policy that encourages the development of

FinTechs in order to drive competition and

increase innovation in finance is a core pillar

of a successful future eco-system, without

undermining consumer protection and

prudential stability.

FinTech’s Capital Injection

Supporting the growth of a new and

embryonic sector such as the Irish FinTech

sector requires an additional capital injection

to encourage greater investment generally,

support growing start-ups and encourage

existing large companies to invest or invest

more. The FinTech sector in Ireland is small

and to enable it to grow further and keep pace

with other jurisdictions it requires an additional

capital injection (150% on current levels) in the

form of investment, incentives and grants.

FinTech Brand – Driving Demand

Building a central banner brand for Ireland’s

FinTech eco-system is a key pillar in the overall

marketing strategy for the country.

Technology Capability

Ireland’s capability across the FinTech

technology arena is at the core of our strategy.

To promote and build greater capability in

core enabling technologies with a focus on

establishing ourselves as a centre of excellence

in specific technology application areas/themes

such as Reg Tech and Blockchain.

Financial Technology / Regulator engagement model of the future

• Establish a Regulator FinTech Policy that provides industry with a framework of engagement for the FinTech sector in Ireland.

FinTech’s Capital Injection

• Further enhance our Taxation and Grant environment

• Increased level of Venture Capital invested into Ireland

• Establish a Capital/Fundraising advice service for start-ups

FinTech Brand – Driving Demand

• Make Irish FinTech brand synonymous with being a place that enables the building of great products and businesses

• Develop jobs strategy for middle-office capabilities

• Promote further and develop a strategy that positions Ireland as a place to come and road-test/trial/pilot new products

Technology Capability

• Create a ‘Technical’ advisory group under the FinTech and Payments Association of Ireland

• Spotlight on Ireland’s Technology centres & hubs to better influence and create opportunities across the sector.

• Create a strategy and roadmap to promote and build Ireland as the CoE for RegTech, Blockchain and Payments.

C: New capability being formed

P: Promote/Awareness/Event/Repackage

Large impact and return expected

Funding required to advance initiative

Key Priorities

Below sets out the key priorities, a sub-set of

the recommendations described previously

and categorised into 4 focus areas.

Building a strong FinTech Foundation

1. EstablishmentofaFinTechAdvisoryPanelundertheFinTechandPaymentsAssociationofIreland(C)

Utilise, enhance and expand the skills and expertise of the FPAI, its membership to be the central go-to industry FinTech body in Ireland that advise companies and agencies in key FinTech areas such as Regulation, Funding and Business Development.

2. Connect Ireland (C)

Create a physical location for FinTech start-ups to encourage networking, co-working and product development. This can be purpose built, or an enhancement of existing capabilities. Encourage the development of Regional FinTech Hubs – linking with University research centres. Develop a Virtual community e.g. web portal to connect farthest reaches domestically and internationally

3. Establish FinTech Ambassadors in key markets (C)

Ambassadors will encourage country to country collaboration and explore market opportunities for Irish fintech companies in key territories. Ambassadors will work with local chambers and sponsors to arrange events, host trade missions, and encourage two-way entry and expansion.

1. Improve success rates of start-ups (P, C)

Development of Mentoring Programmes; to entice seasoned experience into the start-up space; to teach strategic selling into large corporations; and to achieve an increase in the volume of start-ups.

2. Establish regulatory engagement policy

Agree a industry engagement framework with the CBI and DoF which is managed through FinTech liaison officers and the provision of FinTech clinics. Clinics to assess the need of a graduated regulatory approach to start-up companies and new product development.

3. Encouragemoreentrepreneursandinvestorsthroughgrantandtaxincentives(P,C)

Review optimal taxation and grant models from perspective of key constituents; Entrepreneur, Start-up, Scaling, Investor, Large organisation, and how these compare to international FinTech Centres. Theme grants to encourage development and collaboration in key areas of interest e.g. BlockChain, Reg Tech, AI, etc.

Growing & Supporting our Start-up community



Expanding the footprint of larger organisations into new areas of development

Aspire to be a global leader in selected areas

1.  Establishment of a FinTech Advisory Panel under the FinTech and Payments Association of Ireland (C) Utilise the skills and expertise of the FPAI membership to advise start-up and scaling Fintech companies in the areas of Regulation, Funding and Business Development.

2.  Connect Ireland (C) Create a physical location for FinTech start-ups to encourage networking, co-working and product development. This can be purpose built, or an enhancement of existing capabilities. Encourage the development of Regional FinTech Hubs – linking with University research centres. Develop a Virtual community e.g. web portal to connect farthest reaches domestically and internationally

3.  Establish FinTech Ambassadors in key markets (C) Ambassadors will encourage country to country collaboration and explore market opportunities for Irish fintech companies in key territories. Ambassadors will work with local Chambers and Sponsors to arrange events, host trade missions, and encourage two-way entry and expansion.

1.  Improve success rates of start-ups (P, C) Development of Mentoring Programmes to: entice seasoned experience into the start-up space; to teach strategic selling into large corporations; and to achieve increased volume.

2.  Establish regulatory engagement policy Agree a industry engagement framework with the CBI and DoF which is managed through FinTech liaison officers and the provision of FinTech clinics. Clinics to assess the need of a graduated regulatory approach to start-up companies and new product development.

3.  Encourage more entrepreneurs and investors through grant and tax incentives (P, C) Review optimal taxation and grant models from perspective of key constituents; Entrepreneur, Start-up, Scaling, Investor, Large organisation, and how these compare to international FinTech Centres. Theme grants to encourage development in key areas of interest e.g. BlockChain, Reg Tech, AI, etc.

1.  Technology centres & hubs: assess, promote, improve capabilities and drive utilisation (P, C) Increase the utilisation and governance of existing Tech Centres, or establish a new dedicated FinTech Tech Centre.

2.  Taxation & grants: promote, improve, incentivise and encourage new development through collaboration (P, C) Collaboration grants to incentivise large organisations to development more in Ireland e.g. utilisation of an existing capability i.e. Tech Centre, Research centre or the development of a new collaborative initiative.

3.  Middle-office capabilities: move up the value-chain, advance into new areas of expertise. (C) Develop compelling incentivise and propositions to encourage MNC’s to locate middle more office roles in Ireland as automation increasingly replaces back office functions.

1.  Make Ireland a centre of excellence for RegTech, Blockchain & Payments (P, C) Assess requirements necessary to build CoE for Reg Tech, Blockchain and Payments e.g. talent, capabilities, infrastructure.

Key Priorities

Below sets out the key priorities, a sub-set of the recommendations described previously and categorised into 4 focus areas. Funding required to advance initiative


















Key Priorities



















Key Priorities



















Key Priorities



















Key Priorities



















Key Priorities



















Key Priorities



















Key Priorities



















Key Priorities



















Key Priorities





6. Key Recommendations & Priorities for Ireland

36



1. Technologycentres&hubs:assess,promote,improvecapabilitiesanddriveutilisation(P,C)

Increase the utilisation and governance of existing Tech Centres, or establish a new dedicated FinTech Tech Centre.

2. Taxation & grants: promote, improve, incentivise and encourage new development through collaboration (P, C)

Collaboration grants to incentivise large organisations to develop more in Ireland e.g. utilisation of an existing capability i.e. Tech Centre, Research centre or the development of a new collaborative initiatives.

3. Middle-office capabilities: move up the value-chain, advance into new areas of expertise (C)

Develop compelling incentivise and propositions to encourage MNC’s to locate more middle/front office roles in Ireland as automation increasingly replaces back office functions.

1. Make Ireland a centre of excellence for RegTech, Blockchain & Payments (P, C)

Assess requirements necessary to build CoE for Reg Tech, Blockchain and Payments e.g. talent, capabilities, infrastructure.
















Key Priorities



















Key Priorities



















Key Priorities



















Key Priorities



















Key Priorities



















Key Priorities





Making Ireland a FinTech destination of choice that supports and fosters a vibrant, globally-orientated FinTech hub synonymous with:

Recommendations

FinTech employeesin Ireland

Ireland’s Strengths

2015

2014

2008

1Development of cutting-edge technology 2 Design of great

products and solutions 3 Growth of globally

scalable FinTech firms

of FS firms place FinTech at the heart of their business

of FS providers expect to lose 1/5th of their business to FinTech rivals

8,800 at the end of

7% increase on

40% increase since

Stronger FinTech eco-system

FinTech talent pipeline for the future

TalentEntrepreneurial culture,

Solid track record

FundingCorporation tax,

Access to government grantsGlobal diasporaCollaborative people, Globally connected

Emerging specialities e.g. RegTech, Payments

and Blockchain

Proximity & mix of global companiesTop global Tech and

Financial companies located in Ireland e.g. Google, Facebook,

Linkedin, Citibank, StateStreet

FinTech/regulator engagement model

FinTech capital injection

Continued growth in technology capabilities

A FinTech brand to drive demand

69%

25%

2020

Vision

by


38


a fintech strategy for ireland - fsi.iea fintech strategy for ireland 6 7 1. introduction executive...

Documents