Ireland is becoming a hotbed of FinTech innovation

Ireland’s rapidly growing FinTech sector is characterised by a culture of innovation which has led to the establishment of globally successful firms such as Stripe and Realex.

The latest generation of Irish FinTech firms like Currencyfair and TransferMate are bring new and innovative solutions to currency exchange and international payments which are having a major impact on the traditional banks, while others like FundRecs and Fenergo are providing solutions which help established financial services players become more efficient and profitable.

“We are lucky here in Dublin as a city and Ireland as a country,” says PwC tax partner Paul Murphy. “There is a good synergy between the financial services and technology sectors. The IFSC laid a good foundation for this and we have all the big international players here.

“All the major technology players are here as well, with Google, Facebook, Paypal and so on all having operations here in Ireland. There are many spin-offs from the two sectors around the country and we are on our way to creating a FinTech innovation ecosystem.”

He points out that some of the financial services players have not been slow to invest in FinTech innovation. “Citi and MasterCard are setting up innovation centres in Dublin, while Liberty and Zurich have already established research centres,” he says. “The large multinationals are playing their part. There is a natural convergence and cross-pollination between the IT and financial services sectors and this is helping drive innovation.”

KPMG tax partner Anna Scally believes that Ireland is becoming an innovation hotbed for FinTech. “I was at MoneyConf, a FinTech conference in Belfast last month,” she notes. “There were 1,200 people there from FinTech firms in 47 countries and quite a few of them were from the Republic of Ireland. It was tremendous. John Collison from Stripe was there as were representatives from US online business finance company Kabbage. Irish companies like Linked Finance were also there. It was very exciting.”

She cites Colm Lyon as an example of ongoing innovation in the sector. “Colm was at MoneyConf not as a speaker but to check out the competition and trends in the sector,” says Scally. “He founded Realex and recently sold it to US firm Global Payments. He has since set up a new mobile payments firm Paywithfire and is continuing to innovate.”

She points to a number of other Irish firms which are making their market internationally. “TransferMate is transferring payments to 90 countries,” she points out. “The company was built here in Dublin but is regulated in a number of different countries. If you go through the banks it can take three to five days to transfer money to the US. With TransferMate it takes just 24 hours or even same day.

“Currencyfair exchanges money in a form of peer-to- peer currency exchange. The company was established as a result of the founder’s frustration in trying to exchange euro for Australian dollars. These companies are using innovation to exploit the inefficiencies of the banks.”

Scally believes that a number of factors are combining to encourage FinTech innovation in Ireland. “The environment has become much more supportive and encouraging for those companies. Enterprise Ireland has been doing very good work encouraging the sector. The NDRC ran its FinTech incubator 18 months ago. Accenture ran its FinTech Accelerator programme here as well – they have brought what they are doing in New York and London to Dublin because they see that it is worthwhile doing it here. Ireland also has considerable strengths in the software sector – both in the domestic sector and people working for the multinationals. That’s central to it, you need really strong software expertise. It’s not at all surprising that an innovation hotbed has developed here.”

Warren Marmion of Deloitte financial services group says that we should not simply expect innovation to happen naturally in the sector. “There is an amount of scepticism around innovation and what value it is going to bring to the Irish FinTech sector,” he says. “That’s probably partly a result of being Irish; the concept of innovation in financial services will take a little bit of getting used to.”

The other issue

Marmion points to is the relative lack of venture capital finance available to support FinTech start-ups in Ireland. Deloitte research has found that, on average, only €16 million out of €400 million in venture capital investment in high-tech companies has been invested in FinTech companies over the last three years in Ireland.

“In fairness to Enterprise Ireland, though, they have done a fantastic job and have created a very large venture capital fund, but the vast majority of it is not in FinTech. Companies in the sector need to avail of this significant untapped venture capital potential in Ireland and to focus on international venture capital firms that are looking for investment,” he says.

Scally sees part of the solution coming from collaborations between financial services companies and FinTech start-ups. “There is a natural healthy tension between the traditional financial services players and the tech companies which are disrupting them,” she notes. “Innovation hasn’t been their sweet spot and not their principal focus but they’ve got to get with the programme. The domestic and international banks all realise this and our clients in that area are keen to engage with the FinTech sector in the search for innovative solutions.”

Engagement between the two sectors was facilitated by the recent Accenture FinTech Accelerator programme. “The programme organised for mentors from the financial services sector to come in and meet the entrepreneurs,” says Scally.

“This gave them face time with banks and allowed them to get insights from each other. People in the two sectors tend to think about things fundamentally differently, and working together definitely spurs innovation. For the banks it certainly allows them to develop solutions which they can’t do by themselves.”

She believes Dublin has the potential to become a global FinTech innovation hub along with London, Berlin, New York, Silicon Valley, Tel Aviv, Singapore and Hong Kong.

“We have 30,000 people working in financial services and another 100,000-plus in technology. This gives us a critical mass in the two sectors. That’s one of the great things about our location and the fact that we have the IFSC here. Many of the companies there are only too delighted to offer space to FinTech companies to develop new products and services, providing them with a test bed for their innovations.”