"FinTech represents an opportunity for Ireland that has huge potential for growth and employment," says Anna Scally, partner at KPMG Ireland and head of the firm's Technology, Media and Telecoms practice.
A version of this article was previously published online by Business Plus.
Ireland is in the unique position of having the critical mass of components necessary to become a centre for FinTech innovation and development in Europe. Post crisis, we have an increasingly healthy and well-established financial sector with global reach. According to Scally, "we have an unrivalled technology eco-system and a talented workforce with strong finance and technology credentials. We have proactive government support and a wave of start-up companies gaining international recognition. The opportunity for Ireland is clear."
"FinTech" has become a universal description for the application of new technology to financial services, ranging from back office CRM functions to leveraging new mobile technologies, but its meaning is also evolving. The term is now being used to capture a whole range of innovative applications in financial services including mobile banking, crowd funding, digital currencies (for example, Bitcoin), foreign exchange and payments and transactions, as well as providing a general namefor start-ups providing technology services to the financial services sector.
"Technology is enabling a complete sea change in how the financial services sector operates," comments Scally. "Typically, innovation in financial institutions has focused on designing new products but the innovation that is now required is focused on advances in technology. This requires a different approach and a partnership between more traditional banking and financial institutions and dynamic tech companies."
According to Scally, "in almost every sector, including financial services, business have shifted from survival mode to looking to take advantage of an improving economy. Irish and international banks are now hugely focussed on becoming more efficient and focussed on the delivery of products and services to clients. Technology is an enabler and the banks recognise that. That's good news for both start-ups and more established tech businesses."
FinTech is a core component of IFS 2020, the Irish Government's strategy for developing the country's financial services sector. Scally says: "The Irish Government has acknowledged Ireland's strengths in FinTech and the potential for economic growth and jobs offered by the sector is undeniable. Recognising the opportunity early on is promising but real focus must now be given to creating the kind of environment that supports and strengthens FinTech companies, especially those in the start-up space."Given the scale of the potential opportunity, there is intense global competition among countries and cities to establish themselves as hubs of excellence for FinTech. "We have seen an acceleration in the sector over the past 18 months and Dublin can now credibly be listed as a growing centre for FinTech development. Irish FinTech companies are also starting to be noticed internationally. They are winning significant international clients and are gaining traction with international acquirers," adds Scally.
However, given Ireland's modest size, can we compete with bigger financial and technology centres? "We may be a small country, but, according to the IMD World Competitiveness Yearbook 2014, we are number one in the world for our attitude to globalisation. Having a global outlook is critical in the FinTech area and Irish FinTech companies are internationally focussed from day one. That said, we also need to be aware of other markets and notably, our proximity to London. The UK presents both an opportunity, in terms of market growth, but a potential threat in terms of size and scale. On the plus side, Ireland, and in particular, Dublin, can confidently differentiate itself in terms of the relative ease of doing business here," says Scally.
"KPMG has been driving the FinTech agenda in Ireland from the start. We know technology and financial services and have a long track record of working with fast growth companies and ambitious entrepreneurs. It is still early days, but it bodes well for the future if Dublin and other centres can continue to provide the kind of energy and passion needed to support the opportunity for FinTech," notes Scally.
FinTech offers potential for significant future growth. "Irish tech companies and financial institutions are already working closely together to design new products and services. Financial institutions need the insight and skills that many Irish tech companies have and the relationship between the two can be mutually beneficial."
So what sort of products will consumers see as a result? According to Scally, "I think we"ll see much deeper personalisation of tools to help individuals manage their money. We will also see much more use of mobile applications and social media. I also believe we will also see much more efficiency in how payments are transferred and more efficiency in application and approval processes – significantly reducing the time and effort required to apply for a mortgage for example."
Date and analytics (D&A) has become a bit of a buzzword in Scally's view, but in reality it means harnessing the vast wealth of information that technology can unearth and doing something worthwhile with it. "Irish banks and financial institutions are trying their best to understand how digital technologies can help their businesses. The use of data analytics to better understand customer behaviour and product fit and the use of technology in fraud detection and cyber-crime are also significant growth areas. Many of the banks have hired "digital natives" from non-traditional backgrounds to help them understand how to get more out of the use of digital technologies, so I believe there is some work done but there is arguably a lot more to do."
"We know that digital disruption is challenging existing banking business models, with estimates from other markets of around 25 to 30 per cent of current banking industry revenue at risk. My sense is that the Irish financial services sector has realised the challenge and is actively pursuing technological maturity as fast as it can – and that presents huge opportunity," says Scally.
In conclusion, Anna is optimistic about the future of the sector. "The scale of the FinTech opportunity for Ireland is matched only by the talent and ambition of those leading the charge directly in the sector. With financial stability and a renewed energy in the economy, creating the kind of environment that supports the emergence of entrepreneurship in FinTech presents the very real prospect that Ireland will play a leading role on a global scale."
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