Ireland looks to Berlin in effort to grow financial technology sector

Minister of State pays timely visit to fintech start-up hub on German visit

 

Imagine a virtual bridge across the river Liffey: a bridge of ideas and innovation that links the 28-year-old International Financial Services Centre with Grand Canal Dock’s tech hub.

Linking northside banking bricks-and-motor with the southside start-up scene is an idea whose time has come. It’s called financial technology – or fintech – and Ireland is pushing hard to be its European home

On his St Patrick’s tour of Germany, the fintech challenge was uppermost in the mind of Simon Harris, Minister of State for international banking. Just how timely his mission was became clear at his Wednesday morning meeting with leading lights of Berlin’s tech scene. Hours earlier, social media giant Facebook had announced it was moving into the money transfer business via its Messenger app.

Ireland well placed

Grappling with the umbrella term of fintech was his first challenge when he arrived at Earlybird, Berlin’s leading digital venture capital firm. Managing about $1 billion in tech investment, Earlybird’s meeting room had projected on to its wall a real-time spidergram of the fintech sectors the fund is watching (see diagram).

For Earlybird, Berlin’s tech scene is more accident than design – a liberal, increasingly international city where living is low cost and high quality. But Berlin’s seasoned venture capitalists were curious – and complimentary – that Ireland had put together a coherent fintech programme.

“Everything that has happened here in Berlin is in spite of politics not because of it,” said Earlybird partner Christian Nagel. “Nobody has taken care of the fintech segment: it would be great if it happened but we don’t see it happening here.”

So, with its ambitious fintech plan, could Ireland steal a march on Berlin? Harris hopes so. A 54-page strategic report on Ireland’s international financial sector (IFS), launched earlier this month, spells out the challenges ahead and draws in a dozen players, from IDA Ireland and Enterprise Ireland to the National Asset Management Agency and Dublin City Council.

With fintech a crucial IFS subsector, Harris said its start- up scene needs financing and space to grow. Plans are under way for an international financial services conference next year in Dublin, he said, while he is anxious to draw attention to the start-up funding available through the Strategic Banking Corporation of Ireland.

Getting out the word via Government agencies, Embassies and Irish communities abroad is one thing. Finding good-value, high-quality workspace for start-ups is something else. Harris’s proposal is to bring start-ups under one roof. New space in an expanded IFSC is one idea, he said, another, is to anchor fintech at a redeveloped Boland’s Mills. Regardless of where the space is, he said, throwing start-ups together boosts synergy potential.

“Rather than each industry taking on two or three different start-ups and having them in their offices, could they come together to provide a space where people work together, though they’re being supported by different companies?” he asked.

For Irishwoman Jessica Hayden, HR associate with SoundCloud in Berlin, a key factor in Ireland’s fintech plan is whether it can move beyond its existing tech narrative.

“Dublin is known as the HQ of Google but not for start-up companies,” she said.

Financial regulators

“Getting a bank licence doesn’t mean you have to be a traditional bank,” said Valentin Stalf, chief executive of Berlin bank start-up Number26. “It’s important for us to be compliant with banking regulation, but we need more transparency in the process.”

For anyone trying to grasp fintech, Number26 is a good place to start. The Berlin company offers a smartphone app current account with no fees, backed by the security of a real-world bank, German deposit insurance and data-protection standards.

You can set up a current account in eight minutes, said Mr Stalf: two minutes to fill in the forms followed by a six-minute online verification video conference to show support staff your passport and other documentation. No visits to a bank branch are required: Number26 has none.

Since launching six weeks ago, his fully-licensed bank has more than 5,000 customers. Within a decade, he sees this sector taking a third of the banking market. Old-school banks have a choice, fintech start-ups say: join the revolution or, like mobile phone operators, be reduced to becoming infrastructure providers.

“Banks may become the downpipe of the industry: infrastructure providers,” said Matthias Knecht of peer-to-peer lending platform Zencap.

The outcome is unclear but the next financial revolution is already under way. The question for Ireland is whether it has the energy and ingenuity to pair its financial and tech sectors – and regulation of both – to capture the European fintech crown and beat Berlin at its own game.

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