Fintech success built on strengths in technology and financial services
Inward investment has been vital to kick-starting Ireland’s fintech sector. Photograph: iStock
Ireland’s fintech sector has long punched above its weight, due in no small part to the work put in over decades to build a robust and adaptable industry. The nature of the sector means adaptability is crucial to continued success. New legislation, particularly at the EU level, has raised expectations operationally and in the regulatory environment.
While an onerous challenge from the outside, this increasingly regulated environment could well prove an opportunity for the Irish fintech sector to excel. The existing blend of access to EU markets, a mix of local and multinational fintech companies, depth of talent and significant experience could make Ireland a potent force going forward.
“Ireland’s success as a global centre for fintech is driven by a confluence of factors,” says Denis Curran, global head of international financial services at IDA Ireland. “It is a strong interplay of being a strategic gateway to EU markets; a growing ecosystem of the next generation start-ups and global fintech players; access to local and international talent; a strong independent regulator; and [a] supportive enterprise environment that helps companies to scale while driving innovation and digital transformation.”
While inward investment has been vital to kick-starting Ireland’s fintech sector, home-grown businesses are increasingly shaping the conversation internationally.
“Ireland has built a fintech ecosystem that consistently competes, and succeeds, on an international stage,” says Anna-Marie Turley, head of fintech and financial services at Enterprise Ireland.
Part of this is down to the reality of the local market. With a relatively small population, it’s only natural for Irish fintechs to think with an export mindset from the start.
“Irish fintech companies are born international and are designed for scaling into global markets from day one,” says Turley.
The result of these natural needs has meant the sector as a whole has worked with a collective goal of strengthening the offering in Ireland.
“Ireland’s fintech industry garners its competitive advantage from several factors, including a well-established international financial services sector, a strong technology base and an export-oriented indigenous fintech community,” says Leah Donnelly, head of the Fintech and Payments Association of Ireland (FPAI).
The Republic’s positioning certainly helps. Being an English-speaking EU member state with good transport links both within the union and across the Atlantic has played a role in the sector’s growth.
“Ireland’s membership of the European Union provides regulated fintech firms with unrestricted access to EU markets,” says Curran.
Of course, there’s been one big change in the past decade, an advantageous one for the Irish fintech industry, that can’t be ignored.
“Brexit, bizarrely, helped us as a lot of UK firms came to Ireland to get their licences, which helped build the ecosystem, while multinationals set up in Ireland as well,” says Colm Lyon, chief executive at Fire and a member of the advisory board of Scale Ireland.
Being a regulated business in the State presents an opportunity to create strategic value, Lyon says. “Being regulated enables you to deliver a whole range of services that you couldn’t otherwise.” Beyond the importance of ticking the mandatory boxes, having regulated status while based in Ireland conveys a clear message to customers.
“Regulation can offer a clear competitive advantage for Ireland, particularly in building trust and enabling firms to scale across the EU,” says Donnelly.
Trust matters as the regulatory environment has moved from what was an afterthought for early fintechs into a fundamental element of their strategy. Products are shaped and built – indeed, businesses are structured – based on how and when they invest in governance.
Compliance has become a core capability, which is an enormous change for an industry that rose to prominence on the need for speed and a seamless user experience.
“We are increasingly seeing that firms are embedding regulation into their core operating model from the get-go rather than treating it as a bolt-on,” says Donnelly.
This is an important part of the maturation process for the industry as a whole. While adding more complexity, the move towards compliance being part of the offering reflects the needs of customers and regulators alike.
“Regulation is there to protect users of these payment services from bad actors,” says Lyon.
Of course, that doesn’t mean it’s easy. The challenge for fintechs is making sure the burden doesn’t become excessive, especially for businesses still trying to scale.
“There is a risk that cumulative compliance costs, particularly for scaling firms, could slow innovation if not managed carefully,” says Donnelly.
That challenge is where the great opportunity lies for the Irish fintech sector. Decades of experience across regtech and developing the financial infrastructure will stand to companies here.
“From our perspective, many Irish fintechs are not just adapting, they are innovating in response to regulation, creating solutions that can be exported to other markets facing similar challenges,” says Turley.
Furthermore, the wealth of specialised talent built up in Ireland will make the sector an increasingly strong force internationally.
“If you went out looking for someone in the risk and compliance space in Ireland 10 years ago, you might have struggled to get someone in,” says Lyon. “Now there’s no such problem because the availability of talent has increased a lot.” The base is there to build on; now it’s about converting the opportunities available. “Ireland’s next phase of growth will depend on helping fintechs scale internationally,” says Donnelly.
In Curran’s view, that will rely heavily on ensuring the conditions that made Ireland attractive to fintech investment in the first place continue to thrive.
“Ireland’s focus must be on maintaining a competitive, stable and pro-enterprise environment that supports growth whilst also meeting the high standards expected of a modern financial centre,” he says.
