Peter O'Halloran - Collaborator, Fintech Ireland has written this insightful piece on Brexit and the future of European Fintech
[Check out Peter's LinkedIN profile and twitter @p_ohalloran]

June 23rd 2016 may yet prove to be a seminal date in the history of European Fintech. On that date a non-binding referendum, colloquially known as "Brexit", in the United Kingdom supported leaving the European Union.  If the United Kingdom invoke Article 50 of the Lisbon Treaty they are entitled to leave the European Union in an as yet to be determined time period.

The notion of the European Union has been been around for almost 6 centuries.  George of Poděbrady is credited with its conception in 1464 during his reign as King of Bohemia (predecessor of modern day Czech Republic) when he outlined his vision to establish common European institutions and supranational insignia.  The European Union as an entity was established on January 1st 1958 and from a commercial standpoint, its key benefits are access to the European Single Market for Goods & Services, with 500 million internal consumers and a vast talent pool of human resources.

What does this mean for the Future of European Fintech?

In 2015 the United Kingdom Fintech sector generated £6.6 billion in revenues and attracted roughly £524 million in investment, according to EY (1).  If Brexit becomes a reality, London will face the very real prospect of losing its title as global capital of Fintech and the UK exchequer will be negatively impacted.  Commerce thrives in times of stability and certainty and their current conspicuous absence in the UK is already impacting service provider confidence as evidenced by the UK Flash Services PMI activity Index fall from 47.4 in July from 52.3 in June, marking an 88-month low (2).

PwC released a Global Economy Watch report in July 2016 which included a financial services attractiveness indicator ranking all European financial centres (3).  The current top 5 ranking in order is London, Dublin, Luxembourg, Paris & Vienna.  The report highlights the threat of Brexit to London’s position due to the importance of passporting of financial services across the Single Market.  The ranking of a hub city in terms of financial services attractiveness is important for Fintech but equally important is the attractiveness of the tech startup ecosystem.  London also holds this title in the EU for non-EU companies wishing to access the Single Market and this is now also under threat from Brexit.  Quartz have highlighted Dublin, Berlin, Amsterdam and Stockholm as hubs which have already announced their pretensions to the throne (4).  These hubs have considerable demonstrable success in the Fintech startup arena and crucially will retain access to the vast talent pool of people across the EU which is vital to scale startups quickly and something London & indeed the UK as a whole will potentially lose.  The Brexit vote threatens the UK’s hegemonic status and is akin to a modern day economic equivalent of the Berlin Conference of 1884-85 at which the terms of the Scramble for Africa were agreed.

An Irish perspective

There is a certain chronological symmetry to the Brexit vote happening in the year of Ireland’s centenary celebration of the 1916 rising.  It evokes the memory of W.B. Yeats’ poem Easter, 1916, “All changed, changed utterly: A terrible beauty is born”.  Brexit feels like that, an accidental consequence of a political strategy which creates threat and opportunity in equal measure.

In June 2016 the Dublin Commissioner for startups, Niamh Bushnell, issued a press release with the headline “Thanks to Brexit”.   The Irish Development Agency’s (IDA) Chief Executive Officer Martin Shanahan said "While not what we had hoped for – the situation may present opportunity for Ireland in attracting Foreign Direct Investment (FDI). Ireland will remain a member of the European Union with full market access and that will be attractive to investors." There is no doubt that based on Ireland’s attractiveness for financial services and startups it is well placed to capitalise but the extent of the opportunity is unclear because Brexit still has not happened. 

In Conclusion

It is interesting to note that in July 2016, MarketInvoice a London based peer-to-peer small business financing platform raised £7.2 million in Series B funding from a Polish private equity company, MCI.  On July 21st 2016 Mastercard acquired 92.4% of London based Vocalink Holdings Ltd., the payments processor, for $920 million.  These transactions and a number of others show that despite current uncertainty, appetite for UK Fintech remains strong.  It remains to be seen whether the UK and indeed London will retain their positions at the forefront of European Fintech or if they will mirror the fate of David Cameron who succinctly reflected upon his new situation in saying "I was the future, once".

(1). FT.com - “London’s booming fintech market under threat from Brexit vote”.

(2). IBTIMES.co.uk - “Brexit recession looms as UK economic indicators flash red”.

(3). PWC.com - “Global Economy Watch - July /August 2016”.

(4). QZ.com - “After Brexit, the race is on to replace London as Europe’s startup capital”.

Author: Peter O'Halloran, Fintech Ireland Collaborator, @p_ohalloran, https://ie.linkedin.com/in/peterohalloran

Thanks to Orca Money for sharing these useful graphics on Marketplace Lending (Risk v Mitigation) and Innovative Finance ISA.  The graphics are below, however you might find the quality of these graphics better on Orca Money's website at:

• Orca Money's 'Risk v Mitigation' graphic available at https://www.orcamoney.com/p2p-lending-risk-mitigation

• Orca Money's 'Innovative Finance ISA' graphic available at https://www.orcamoney.com/ifisa-infographic

Following a number of informative meetings with Padraig Brosnan of Treasury Delta over the past few months, I thought his fintech startup would be a great story to feature on www.fintechireland.com - Peter Oakes, Founder, Fintech Ireland.

Those of you following the Irish fintech scene may have seen our tweet about an article in the Irish Examiner on 8 July featuring Padraig Brosnan, the founder of Treasury Delta (www.treasurydelta.com) discussing his new disruptive product which looks to be one of the more innovative ideas we have seen come out of Ireland this year.

Rather than follow the fintech herd into the financial services consumer market, Padraig and his team have looked to the higher margin element of the banking value chain, i.e. the business to business market, with a solution which allows companies and financial institutions engage in a far more efficient and economic manner when it comes to the pricing of cash management products and services.  If you run a business you’ll appreciate the importance of cash management.  Indeed a CEO of a global bank was recently quoted saying that banks need to do just three things, and do them well, to compete; (1) take their customers’ deposits; (2) manage clients’ cash receivables and payables; and (3) finance their customers’ needs. Padraig and his team are squarely on the money (no pun intended) here. To this end, Treasury Delta has identified a piece of the bank value chain which many banks have long neglected vis-à-vis the best interests of their clients.

Through digital technology, Treasury Delta’s platform revolutionises the complex and overly manual tender process which companies and financial institutions currently undertake.  Treasury Delta’s solution has one [key] outcome in mind – to save companies and financial institutions significant time and money through its simplified and streamlined process.  For example, one key feature of the platform is the communication channel between the company and the financial institution executed via a highly secure and encrypted IT platform which is OWASP compliant.

Although the platform itself is enough to capture the imagination, it is no less interesting than Padraig’s corporate treasury experience with both ESB and Bank of Ireland.  During his time at ESB he gained first-hand experience of how painful, complex and costly the cash management tender process is for both companies and financial institutions. Talking to Padraig I obtained a better understanding of the interest which Treasury Delta  is generating with SMEs, larger corporates and even multinational companies.  Not only will their platform help companies identify cost savings but it will save them significant man-hours on the whole process, particularly for those larger organisations. As we all know an idea is just an idea until it has been researched and tested.  Treasury Delta piloted its platform with both SMEs and corporates in conjunction with some international financial institutions in a very discreet and controlled environment.  Every company was able to pinpoint cost savings with one large corporate identifying cost savings of over 50% on their annual transactional banking charges. Once a company completes the customer journey on the platform financial institutions will respond with their pricing within a two week period. Given the premise of its innovative business model Treasury Delta’s disruptive solution will give financial institutions, particularly new entrants or those with a low market share, the opportunity to bid for new sustainable business in a manner not previously available which is efficient, economical and - in this new speed to market world - timely. 

There are other upsides.  Financial institutions will receive access to highly valuable data analytics on a company’s overall business banking requirements outside of cash management for which they can also quote through the platform, broadening the revenue base for Treasury Delta’s financial institutional clients through the existing business banking relationship channel. Quite a bonus when one considers that the existing traditional manual model does not provide banks with the ability to leverage up-to-date electronic information on a client company’s financial information.  Not only do banks gain valuable economies of scale, they should benefit from lower travel costs given the reduced need to perform physical visits to, and in person verification of data at, a client’s office.  One wonders what else Treasury Delta’s platform can deliver to financial institutions looking to provide additional financial services in a competitive and margin-pressured market. After all, it stands to reason that the more you know about your customer, the better you can identify how you might service it better. 

In wrapping up this piece, I’ll leave final words to Padraig Bronson:  “Treasury Delta’s disruptive solution has been described as a potential game changer for the B2B FinTech market by both a MNC treasurer and corporate banker.  Based on our extensive research we see an enormous international market opportunity here.  Our solution is very dynamic and scalable and we are currently positioned for three markets - Ireland, Northern Ireland and Great Britain.  We are extremely grateful for the support received to date from both the Dublin City Local Enterprise Office and Enterprise Ireland which identifies Treasury Delta as a high potential start-up.  One of our next steps is to bring international investors into our seed round.  We have been very fortunate in having already built a highly skilled technical team and securing channel partners to promote and sell Treasury Delta’s unique product offering into this exciting international market opportunity.”

If your company is interested in using Treasury Delta’s platform for FREE all you need to do is register your interest, which takes less than a minute, at TreasuryDelta.com.