FinTech has the potential to be the next big player on Ireland’s FDI field
Ireland, with its strong technology and finance sectors and a vibrant start-up community, has the potential to become a major hub for attracting high potential fintech companies, but only if we adopt a joined up strategy that brings together private business, government agencies and regulatory authorities.
The changing face of FinTech
The application of technology to the financial world is nothing new; banks were early users of the telegraph and the latter half of the 20th century saw the introduction of credit cards and ATMs. What has changed in the last eight or so years is that FinTech companies are starting to offer some real competition to traditional banks, with digitized innovations like mobile wallets, payment apps and crowdfunding platforms replacing rather than enhancing existing banking systems. As a consequence, high street banks have been forced to cut costs and improve the quality of their service.
Meanwhile, FinTech companies have continued to expand their market share of the financial services industry, becoming more attractive to investors. Global venture investment in 2016 grew by 11% to $17.4 billion according to data provided by Pitchbook, and PwC has estimated that cumulative investment could surpass $150 billion in the next 3 to 5 years. So it comes as no surprise that FinTech is a key target area for foreign direct investment to Ireland.
Creating a FinTech ecosystem
For FinTech to flourish in Ireland, companies need access to capital and to markets, financial expertise and regulatory and state support. To ensure these conditions exist within Ireland, IFS2020, a 'whole-of-Government' approach to driving the growth and the development of international financial services, was introduced in 2015. As part of the IFS2020 strategy, a number of different public and private sector working groups meet regularly to address all the building blocks that constitute a FinTech ecosystem in terms of education, fiscal policy, research and collaboration.
Brexit also offers opportunities, with London’s position as a leading centre for FinTech under pressure in the wake of the June 2016 referendum. A KPMG report published in February 2017 found that investment into UK FinTech companies declined sharply in 2016 compared to 2015. If there is a hard Brexit, Ireland could benefit from the migration of UK regulated firms seeking regulation in a different single market jurisdiction. We could also be seen as a friendlier location for a sector that relies so heavily on the free movement of an international talent pool.
Poised to capitalise
Ireland has a lot to offer FinTech companies and their investors, including an excellent track record with ICT companies, a mature financial services sector, a skilled work force, access to the EU market, strong collaboration between industry and academic researchers and an attractive tax regime for business startups.
There have been several success stories already – Realex and Fintrax – and a recent survey by Munich-based consulting firm Roland Berger found that Ireland came in joint first place with the UK in the list of countries targeted for expansion by FinTech companies in mainland Europe.
Now we need to push forward with creating a FinTech ecosystem that will enable us to capitalise on those positive signs and become as recognised for FinTech as we are for ICT, medical devices and aircraft leasing.
This month’s blog is kindly provided by Joanne McEnteggart, Co-Managing Director of First Names Group in Ireland. First Names Group provides corporate, trust, fund and real estate administration services. Its corporate solutions include cross-border structuring, foreign direct investments and structured finance. See https://www.firstnames.com/ireland for more information.
First Names Group does not provide legal, tax or investment advice and the content in this blog should not be regarded as such.
The views expressed in the posts and comments of this blog do not necessarily reflect the views of the Institute of Directors in Ireland. They should be understood as the personal opinions of the author. The content of this blog is for information purposes only and the Institute of Directors in Ireland is not responsible for the accuracy of any of the information supplied.