Ireland's Minister of State for Financial Services, Credit Unions, and Insurance Seán Fleming TD today (Thursday 11th February) launches the Ireland for Finance Action Plan for 2021 following Cabinet approval.

The 2021 Action Plan has four priority areas; Sustainable Finance, Diversity, Regionalisation, and Digital Finance. It contains 16 new measures to build on the resilience shown by the IFS sector over the last year.

New actions, include:

• Establishing a Department of Finance Fintech Group
• Developing proposals for increased financial services collaboration in the Grand Canal Innovation District (GCID)
• Delivering a new Masters programme in fintech innovation
• Promoting careers for women in the Financial Services industry, as part of the ‘Career less Ordinary’ campaign
• Developing a portfolio of sustainable finance education programmes
• Working with the office within the Department of Finance tasked with encouraging greater competition in the Irish insurance market
• Promoting the Investment Limited Partnership vehicle

Ongoing initiatives:

• Engage at EU level on the latest Capital Markets Union proposals
• Engage at EU level on sustainable finance developments
• Engage on and analyse post-Brexit financial services issues
• Continue the rollout of Ireland’s sustainable finance innovation programme supporting the development of new IFS environmental, social, and governance products and services
• Deliver training programmes in sustainable finance and responsible investment supported by the Sustainable Finance Skillnet
• Maintain a regional focus in developing the IFS sector

Commenting on the 2021 Action Plan, Minister Donohoe noted:

Minister Fleming leads on the implementation of the Ireland for Finance strategy which strives for Ireland to be the recognised global location of choice for specialist international financial service. Ireland for Finance is the strategy for the development of the international financial services (IFS) sector in Ireland to 2025 and was included in the Programme for Government.

What is "Ireland for Finance?"

The Ireland for Finance strategy is structured around the following four pillars:

1. The operating environment pillar is focused on ensuring the policy, culture and legislative conditions underpinning IFS will support growth;

2. The technology and innovation pillar is focused on providing a collaborative approach to addressing emerging challenges and opportunities in technological developments;

3. The talent pillar seeks to ensure that we continue to have skilled people to meet the demands of the IFS sector, including meeting new and changing skills ; and

4. The communications and promotion pillar is focused on ensuring that Ireland’s IFS offering is communicated to all those who are or may be attracted to investing in Ireland.

Minister of State Fleming has identified his priorities for the coming year as Sustainable Finance, Diversity, Regionalisation, and Digital Finance.

Ireland for Finance utilises a whole-of-government approach which is supported through ongoing collaboration between public and private stakeholders and educational institutions to ensure the talent and expertise of all three sectors can continue to be successfully harnessed to build on existing achievements and secure the ambitions set out in Ireland for Finance.

The Strategy is updated each year by means of annual Action Plans. This approach ensures that the Strategy remains relevant and up-to-date in identifying and addressing emerging challenges. Each annual Action Plan contains a list of measures grouped under each of the four pillars to be actioned in that year with a responsible stakeholder tasked with leading on the execution of each measure.

The implementation of the Strategy is overseen by a public sector High Level Implementation Committee (HLIC) with assistance from an Industry Advisory Committee (IAC). This Joint Committee meets quarterly and it is chaired by Minister of State Fleming. The HLIC membership consists of senior officials of the Departments of the Taoiseach; Further and Higher Education, Research, Innovation and Science; Foreign Affairs; Business, Enterprise, and Employment; and Finance and the Chief Executive Officers of the IDA and Enterprise Ireland. The IAC includes key industry stakeholders such as representative bodies (secretariat), advisory firms and senior executives from companies across the different international financial services sectors.

** Two additional Electronic Money Firms now authorised in Ireland **

Our last post on additions to the Irish regulated fintech family of payment services firms and electronic money firms was back on 30 September when we released Version 2.1 of the 'Emoney & Payment Services Firms Authorised in Ireland Map' as at 11 September 2020.

Again thanks to CompliReg we have released an update to that Map, which now stands at Version 3.0.  The new joiners are Modulr FS Europe Limited and SumUp Limited.  In addition to their emoney authorisations, both firms can provide payment services 3(c) and (5), and in addition, SumUp can also provide payment services 3(b).  See below for a description of these payment services numbers*.

Followers of Fintech Ireland will recall that we co-hosted an event with Modulr at the start of the year (when during pre-covid 19 days we could all get together) on 3rd March 2020, aptly titled 'The Future of E-Money - Modulr & Fintech Ireland' with Myles Stephenson, Founder and Chief Executive and John Irwin, General Manager of Modulr and Fintech Ireland's/Fintech UK's our Peter Oakes.

Welcome to Ireland SumUp and Modulr and soon too the many others making their way through the Central Bank of Ireland authorisation pipeline!  

Those firms in the above Map which are indigenous to Ireland also appear on our bigger Fintech Ireland Map version 3.0 which you can find here. If you think you should be on the Fintech Ireland Map, complete our Survey.  Do it soon as version 4 of that Map is slated for release very shortly!

If you are looking to get authorised in Ireland as an emoney or payments firm, see these Authorisation Guides and feel free to contact us for a informative dialogue on the authorisation process.  We are chatting with about 2-3 firms a week.

* Payment Services:
3 Execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider:

(b). Execution of payment transactions through a payment card or a similar device;
(c). Execution of credit transfers, including standing orders
5. Issuing of payment instruments and/or acquiring of payment transactions

Thanks NewsTalk for radio interview this morning on Brexit & "Regulatory Arbitrage" and the fintech opportunities for Ireland. LISTEN TO AUDIO HERE

Background to this piece, thanks to Donal O'Donovan, is Irish and international media over the past few weeks reporting claims that Ireland is becoming a victim of 'regulatory arbitrage' and 'dangerous competition' for 'Brexit Spoils'.  The Irish Minister for State (Financial Services), Eoghan Murphy has been moved to raise concerns with Valdis Dombrovskis, the EU financial services commissioner.  Murphy informed Reuters that “We are hearing from various sources that companies are being offered certain incentives, that they are offering a back door to the single market, without the requirement to have capital to back up their entities in the European Union.”   In a sign that there may be more to come, the Financial Times reported that "against the background of the risk to stability in the European financial system. The heads of Esma and EIOPA, two key EU financial regulatory agencies, are believed to have raised similar concerns [to those of Eoghan Murphy] in recent days." [source FT, 14/03/2017 - Irish complain about rivals in Brexit race for London’s business].  

This post is also carried at LinkedIN - https://www.linkedin.com/hp/update/6249557917670862848 

PDF format here  

Conor McMahon, Reporter at Fora talks to Peter Oakes, Founder of Fintech Ireland about how automated financial advice is expected to shake up the wealth management sector

SO-CALLED ‘ROBO-ADVISORS’ already manage billions of dollars in the US, but they have yet to make their way to these shores.

Traditional wealth management has been largely untouched by the march of digital on this side of the Atlantic, and the sector is still overwhelmingly burdened by paper and admin work.

But not for much longer. Automated financial advice is already making waves in the UK, and Ireland could see a surge of robo-advice firms setting up shop in a bid to access investors in Europe.

Fora spoke to fintech expert Peter Oakes, founder of Fintech Ireland and a former director at the Central Bank, to get the lowdown on what exactly robo-advisors do and how they might shake things up in 2017.

What are robo-advisors?

Robo-advisors are basically online money managers or “investment intermediaries”, Oakes says. They offer financial advice based on an algorithm.

Users supply them with financial and personal information that they use to make recommendations on where to invest. In a nutshell, they offer low-cost financial advice.

“We all know that the biggest expense of a portfolio is all the administration,” Oakes explains. ”The thinking behind a robo-advisor is that there must be a large portion of people out there that actually just need very simple advice.”

Independent financial advisors take a big bite out of returns on investments in fees. Robo-advisors basically do away with that money trail.

What kind of advice do they give?

The user fills out an online form and the robo-advisor firm feeds that data into their technology. The robot uses that information to create an automated series of investment recommendations based on the user’s appetite for risk.

For instance, somebody close to retirement would be categorised as having a low-risk appetite, Oakes explains.

Based on the details furnished to the robo-advisor, it would most likely recommend that a user invests in money markets and avoids property ”because you really want your funds to be liquid because you’re coming up close to retirement. The same should apply in the case of equities, as there is greater risk there – and that’s want you probably wish to avoid when you are about to get the golden watch.”

Will they do away with humans?

The answer is no, but they still pose a potential threat to traditional wealth management firms and financial advisors.

Much like any industry that robotics and automation have affected – car manufacturing, media, customer service to name but a few – the humans won’t be completely wiped out, but their functions change.

“There still will always be a need for a human intervention from time to time,” Oakes says.

“Because it’s a regulated service, you’ll still have human interaction, especially if you’re lodging a complaint – maybe (the robo-advisor) has moved your money into the wrong fund even though you have proof of confirmation.”

It’s worth noting that the some users might be nervous about a complete lack of face-to-face interaction. A wholly automated experience might spook them from putting their trust in an algorithm.

“It may just be that the robo-advisor actually just gives advice and then leaves it to the individual to execute how they get that investment exposure,” Oakes suggests.

The benefits

The pros of robo-advisors outweigh the cons – on paper at least.

“If you look at your investment portfolio and you have a pension fund for example, even when you’re returning 5% a year, after the financial advisor starts taking out charges at the current rate, you’re probably only getting a 1.5% return on your money,” Oakes says.

“This is an opportunity to increase that 1.5% to maybe 3%, so you’re doubling your return.”


Who will they appeal to?

Oakes thinks robo-advisors will be targeted at people who are already involved in passive investments, like exchange-traded funds (ETFs), as these kinds of investment porfolios are easier for individuals to invest in without the need for financial advisors.

A robo-advisor would suit those types of investments because an algorithm can easily identify trends.

“There are tracker funds out there and they’re doing very well,” Oakes says. “You could set up a robo-advisor that predominantly puts people into tracker funds or recommends tracker funds.”

Robo-advisors will also appeal to anyone who is used to doing their banking online.

When will they come to Ireland?

It’s hard to say for certain, but robo-advisors are tipped to enter the market in 2017.

One of the possible motivations for coming to Ireland is access to the European Union’s investment management licence, MiFID, short for the Markets in Financial Instruments Directive. It’s the regulatory licence that non-banks use for investment management services. 

A robo-advisor firm that wants access to EU member-state markets might look to set up shop here and avail of the MiFID directive.

“If you were an Irish investment adviser or wealth manager, there are threats and opportunities here – in equal amounts,” Oakes says.

What does it mean for the heavyweights?

A recent PwC report suggested that traditional wealth fund managers are asleep at the wheel when it comes to robo-advisors.

It described the global wealth management industry as “one of the least tech-literate sectors of the financial services industry” and warned that it was falling behind non-financial services industry.

“Client expectations is sharply at odds with what’s currently being provided,” it said.

According to the report, what is currently on offer in the wealth-management industry is sharply at odds with what their clients, high net worth individuals (HNWIs), expect.

In her commentary on the report, PwC’s Olwyn Alexander said that the “sector is now acutely vulnerable to digital innovation from fin-tech newcomers, including robo-advice services” – and that firms that didn’t respond wouldn’t survive in the medium- to long-term.

Evaluating Ireland as the overseas location for your Fintech business
Peter O'Halloran, Fintech Ireland Collaborator, @p_ohalloran 

Choosing a location of strategic importance, whether a headquarters or a regional office for your Fintech business is a fundamental decision and must be taken with the benefit of real insight.  There are a number of requirements which are of key importance to consider.  These include the availability of a skilled workforce, market access, a stable regulatory environment and a functioning ecosystem.

Ireland's ability to meet these requirements is underpinned by membership of the European Union, the Central Bank Reform Act of 2010 (which created a new single body called the Central Bank of Ireland responsible for both central banking and financial regulation) and by the scale of indigenous success which is evidenced in the Fintech 20 Ireland longlist (1).

It is therefore extremely encouraging for a Fintech business in start-up or expansion phase to find a country which has these fundamentals in place and in addition has a political administration with a stated objective to actively lead growth in that industry.  In March 2015, the Irish Government released a strategy for Ireland’s International Financial Services sector for 2015 to 2020, IFS2020.  The vision outlined in IFS2020 is for "Ireland to be the recognised global location of choice for specialist international financial services, building on our strengths in talent, technology, innovation and excellent client service, while focussing on capturing new opportunities in a changing marketplace and embracing the highest standards of governance" (2).  5 strategic priorities are set out in IFS2020 and one of these focuses on Fintech and is as follows: "Drive Research, Innovation & Entrepreneurship in the IFS sector, with a particular focus on financial technology & governance, risk & compliance".   Furthermore, there is real activity in this space in Ireland, with $631 million invested in Fintech in 2015 which represented 22% of the $2.897 billion investment in Fintech across Europe in 2015(3).  

How we can help
At Fintech Ireland our objective is to advance Ireland's unique ability and leverage its capacity, to become and remain a global centre for Fintech and we can help you make an informed decision by bringing the ecosystem to life.  We host seminars where we invite members of the Irish Fintech ecosystem to share their experiences and learnings with you at DogPatch Labs, Ireland's leading co-working space for scaling technology start-ups and the incubator for the Enterprise Ireland Fintech fund.  Through this collaborative interaction, with oversight from the Fintech Ireland team, companies gain a real understanding of how the ecosystem works and gather invaluable network contacts which can be drawn upon into the future.  Fintech Ireland can guide you (free of charge) in reaching your decision and help maximise your potential for long-term success.  How you decide execute is up to you - i.e. whether you do the leg work yourself or need a professional adviser.  If the latter, we know a lot of good people locally.

Multinational Fintech presence in Ireland
Some leading multinational corporations have established Fintech Innovation labs in Ireland in recent years such as Accenture, Citibank, Liberty, MasterCard and Zurich.  There are also numerous global Fintech companies who have established and strengthened their presence in Ireland over the past few years such as Elavon, First Data, Global Payments, PayPal, Stripe, Vesta and YapStone.  This is a clear indication that the ecosystem is functioning and that the talent pool and business environment are conducive to success.

Indigenous Fintech success in Ireland
There are numerous successful Fintech companies which were founded in Ireland and have remained indigenous.  A selection of these include Currency Fair, Ding, Fexco, Fineos, Orca Money and Sysnet Global Solutions.  These companies have all scaled globally whilst continuing to invest in research and development in Ireland.  

Access to investment
The availability of investment for Fintech in Ireland is growing.  In Ireland, there are no Venture Capital firms that focus exclusively on Fintech but there are quite a number which invest in in the space and this is set to grow given the success of companies in the sector and the overall investment in Fintech in Ireland.  A selection of Venture Capital firms in Ireland which focus on Fintech Investment include ACT Venture Capital Limited, Atlantic Bridge, Enterprise Equity Venture Capital, Frontline Ventures, MML Growth Capital, NDRC and Pentech Ventures.  In May 2016, Enterprise Ireland announced a €500,000 fund for Fintech Start-ups. Successful applicants can be awarded up to €50,000 each in equity support and will also get membership to Dogpatch Labs in the International Financial Services Centre (IFSC) and access to the Ulster Bank Innovation Solutions team and industry  masterclasses.  The fund which was setup as a result of IFS2020 was launched by the Minister for Jobs, Enterprise and Innovation Mary Mitchell O’Connor who commented that “Ireland is recognised as a key hub for Fintech innovation and this new fund will make a real contribution to supporting more start-ups and ultimately more jobs in Ireland”.

Reference
Fintech Ireland has held a number of these events in the past and one of the participants, Credit Agricole, kindly provided a reference: "Back to France, after a great stay in Dublin, full of amazing meetings, I would like to thank you for the nice moment you gave to the Credit Agricole delegation.  The participants mentioned the interest in your speeches and the passion transmitted.  You contributed to the success and satisfaction of this learning expedition", Sylvain Potier, Chargé D’Affaires, Banking, Scoop. [NB: Neither Peter Oakes, Peter O'Halloran, Fintech Ireland nor any fintech company we showcased at the Credit Agricole event  received any fee or other consideration for our work on the day!] 

Find out more
To understand what Fintech Ireland can do for your business, please visit www.fintechireland.com  and get in touch.  Sign-up to the free Newsletter at http://www.fintechireland.com/get-involved.html 

(1). Irishtechnews.net - Fintech 20 Ireland
(2). IFS2020 - A strategy for Ireland's International Financial Services Sector 2015-2020.
(3). Accenture.com - Global Fintech Investment Growth Continues in 2016 Driven by Europe and Asia.

Get in contact with the author here Peter O'Halloran, Fintech Ireland Collaborator, @p_ohalloran