By John Daly
Over 7,000 people work in the Irish financial technology - or fintech - sector, with most start-up companies operating in the space intending to extend their workforces by a minimum 50 additional employees by the end of this year.
The Fintech Census, the first of its kind in Ireland, and which was compiled by Enterprise Ireland and EY, showcases an industry of which almost a fifth of companies achieved revenue growth of up to 500% last year.
Expansion into wider markets is a universal feature of the sector, with 27% aiming to extend their commercial footprint into the UK and Europe, bolstered by 26% looking further afield to the Asia-Pacific region.
The main areas of focus for Irish fintechs are regulation technology, digital identity, payment and remittances, asset management solutions and financial software. One-in-five companies aim to raise €5m or more in their next funding round.
The high usage of mobile devices and technology-based solutions is pushing the demand for financial and banking solutions, according to research by the Dublin-based company Markets and Research.
Banks and firms are investing heavily in technology-based solutions, competing with contemporary fintech companies and that is the key growth driver for the global fintech market, estimated to be worth over €270bn by 2023. Major technologies involved in the fintech sector are artificial intelligence, blockchain, cryptography, biometrics and identity management, cyber-security and robotic process automation.
While North America is currently the leading contributor, the pace of growth in the Asia-Pacific region is anticipated to be the highest. Latin America is also emerging as another prominent region in terms of fintech development, driven by initiatives in Mexico and Brazil.
Digital disruption in the Asia-Pacific region offers significant opportunity for Irish fintechs, according to Felimy Greene, former digital officer for the Asia and EMEA regions at Citi.
Speaking at Ambition Asia Pacific, a major conference recently organised by Enterprise Ireland, Mr Greene described how social networking platforms are leading the charge when it comes to disrupting the banking sector in Asia.
Korean messaging application Kakao, which the average Korean uses 14 hours a month for daily communication, is a primary case in point, he said. In 2017, it launched a highly anticipated digital-only bank. Within 24 hours of the launch of Kakaobank, a quarter of a million people had opened an account. By the end of the first month, that figure had increased to three million.
Chinese platforms such as Alipay and WeChat are already moving beyond payments into areas such as investments and insurance, with considerable disruption having already taken place across the region. Among the most prominent features to emerge is the use of QR codes and phone cameras for payments, which allow many Asians to go through their entire day without ever needing cash or cards.
"This is turning some of the fundamentals of banking upside down, not least for bank branches that have become redundant right across Asia-Pacific," said Mr Greene.
Noel Moran, CEO of Prepaid Financial Services, is an Irish fintech pioneer, providing e-money payment technology solutions including e-wallets, physical and virtual pre-paid cards, and IBAN accounts in the UK and the eurozone. The company achieved a record-breaking financial year in 2018, with revenue rising to over €72m and an 11th consecutive year of profitability.
"The potential within the sector is what has always appealed to me - after all, fintech is the perfect merger of finance and technology," Mr Moran said.
Looking to the future, he sees the sector as primed for major growth, but with a cautionary note for Ireland:
"I am not sure Ireland is ready to fully capitalise on this. The regulator in Ireland has only issued two e-money licences in the last 10 years - not the sign of a forward-thinking country when it comes to regulation."