The technology to transform the financial services world

A quiet revolution has been taking place in the financial world over the past two decades or so due to the advent of fintech, the fusion of technology and financial services. Consumers and businesses can now manage their finances completely online without ever having to visit a bank branch while ATMs are vanishing from our streets as cash disappears from wallets and tills.

That’s just the beginning. Fintech spans every area of technology and innovation in the financial services sector from payments to foreign exchange, risk and compliance, business intelligence, peer-to-peer lending, buy-now-pay-later services, insurance underwriting and investment advice.

According to a report published last month by Boston Consulting Group and QED Investors, global fintech revenues are projected to grow sixfold from $245 billion to $1.5 trillion in 2030. This will see the sector grow its share of the $12.5 trillion global financial services market from 2 per cent today up to an estimated 7 per cent in 2030.

The sector is thriving here in Ireland as well. “Enterprise Ireland supports around 250 firms in the broad fintech sector including regtech, payments, funds administration and so on,” says Karen Cohalan, fintech, financial and business services manager with the agency. Total exports reached €2.4 billion in 2022, a 14 per cent increase on the previous year.

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Ireland’s reputation for excellence in financial services and technology, combined with its EU and EMEA based headquarters, make it an irresistible choice for companies looking for international growth,” says Raisin Bank chief client officer and managing director Katharina Leuth. “It’s no surprise that some of the biggest names in banking and technology have already chosen to call Ireland home, and I expect more to follow suit in the future. The similarities in business and law between the UK and Ireland also make the transition smoother for companies making the move. All of these factors ensure that Ireland’s position as a global hub remains secure as the fintech and payments sector continues to thrive and evolve.”

“Fintech allows financial services to better deal with regulation, cybersecurity concerns, manage wealth and investments and much more,” notes Anna Scally, head of technology and media at KPMG. “The payments sector, which is currently dominating the fintech market, is having a significant impact on consumers in Ireland. Global investors still show a high level of interest in this area despite economic uncertainty, demonstrating just how much attention, innovation and collaboration is occurring in the sector. Neobanks are becoming an increasingly popular rival to traditional banks in Ireland, which is not only affecting consumer behaviour but also causing traditional financial institutions to up their game technology-wise.”

Transformation in financial services

Those neobanks include Revolut, and Maurice Murphy, country lead for Ireland, points to the nature of the transformation in financial services enabled by fintech. “As consumers, we have gone from banking services being available only between 10am and 4pm on weekdays, to banking being available 24/7, 365 days a year. At any time, Revolut customers can send euro payments to banks across Europe – and they will arrive within 10 seconds. We’ve transformed simple things like splitting bills and sending money to friends; we’re making it easy to swap currencies at the best rates; we can offer people instant cashback virtually every time they shop online with Revolut.”

The bank has now set its sights on the credit, insurance and personal investment markets. “So many of these things are still difficult and complex: we are driven by a determination to make them simple, fast and easy to understand,” says Murphy. “And we’re also transforming business banking too, removing many of the costs and barriers that existed before. Businesses need to be able to make and receive payments around the world instantly and flexibly; to have an overview of their finances at their fingertips; to give their staff freedom to spend, but with continuous managerial oversight.”

The traditional banks have been active in the digital space for a long time as well. “In 1997 AIB led the way in Ireland and launched its online banking service, a year before Google was founded,” says AIB’s chief digital officer, Seán Jevens. “Today in AIB over 77 per cent of our 3.2 million personal customers bank digitally, with 79 per cent of our key products sold digitally.”

And they haven’t been slow to learn from their digital counterparts. “The neobanks, without a physical footprint, launched digital onboarding journeys, to progress customers through the anti-money-laundering process,” Jevens adds. “AIB and many other banks have built on this experience, and today over two-thirds of all new personal customers join AIB on their smartphone without ever visiting a branch.”

While those simpler interactions have been digitalised for some time, technology advances, online brokers and aggregation sites have also begun to address more complex products and needs, he points out. “Banks have responded to customer and market demand and AIB seeks to make the customer journey as seamless as possible. Customers can apply for a mortgage online, secure their approval, while they can also access their AIB life products direct on their mobile app.”

The human touch

Banks and other financial institutions are being assisted by fintechs on their digitalisation journeys, according to Skillnet Ireland chief strategy officer Mark Jordan. “Traditionally, large financial institutions like asset managers, investment banks and retail banks have tended to build, buy or partner when looking for technologies to avail of new opportunities. We are now seeing less M&A and more partnering. In Ireland, we are seeing fintechs coming together with organisations in strategic partnerships.”

Jordan also notes that the skill sets required to work in the fintech sector aren’t necessarily related to digital technology. “There are great opportunities in the industry to work in customer-facing roles. The industry needs people with experience of the customer journey. Automation doesn’t just happen. It needs a combination of good technology skills and an understanding of the human experience.”

Skillnet Ireland is helping workers displaced as a result of redundancies in the traditional banking sector to avail of opportunities in fintech. “Those people tend to have really strong customer-facing skills and we are providing pathway programmes to give them the tech skills that would allow them compete for jobs in the sector.”

Murphy believes Ireland has the potential to become a global fintech hub. “To do that, we need to encourage entrepreneurship and innovation. But we have shown time and again over recent decades that where we collectively set goals as a nation, we achieve – and usually overachieve.”

Scally says Ireland’s favourable corporate tax regime, educated workforce and strong and supportive business community combine to create a favourable environment for fintech to thrive. “Policymakers, government bodies and regulators should continue to monitor Ireland’s competitiveness relative to other jurisdictions and continue to fine tune and constantly improve,” she adds.