In a wide ranging speech made today by my former co-director Gareth Murphy, Director of Markets at the Central Bank of Ireland, Mr Murphy addressed a number of important issues, especially in the areas of financial innovation, digital currencies, fintech and regtech as he laid out his thoughts on 1) Culture and personal accountability, 2) Technology, 3) IT & Cyber Risk, 4) Disclosure of Investment Fund Fees, 5) Stress Testing of Investment Funds, 5) Data and data-driven supervision and 6) the Current Workload of ESMA's Investment Management Standing Committee (which Mr Murphy Chairs)

Rather than taking up space in this section by repeating the post on LinkedIN, I have included a link to my post here.  Note that my post doesn't intend to look at all points addressed by the Central Bank. Rather, I read through the speech to look for and extract novel and unique remarks on areas dealing with culture, technology and technology led supervision.

https://www.linkedin.com/pulse/supervision-ever-evolving-craft-hard-data-technical-peter-oakes

Founder of Fintech Ireland, Peter Oakes, contributes to Simon Rowe's excellent article on Ireland's booming fintech sector in the Sunday Independent (3101/2016).  The global financial crisis has ushered in a new wave of innovation as banking giants have been forced to rethink business models while tech start-ups reinvent ways to loan cash and transfer money. If Ireland can overcome the damage to its reputation from last week's Oireachtas report, it is uniquely placed to become an international financial technology hub for fintech, writes Simon Rowe of the Sunday Independent.

"Peter Oakes, the founder of Fintech Ireland, an advocacy group for the sector, and a former director of the Central Bank, echoes Watson's blunt assessment.

• Traditional forms of banking are all now trying to jump into fintech but they've still got problems in their outdated back-office systems. They've still got problems in their payments systems. And perhaps they really should be spending their money on fixing these before jumping into new initiatives because those new initiatives are highly IT dependent.
  
• In Ireland, the banks weren't very good at IT. They also weren't very good at making credit risk decisions. There was insufficient expertise of IT at board level and banks' management information systems were inadequate to monitor their risks during the period leading up to the crisis. A big unanswered question is whether this has in fact changed."
  

Peter Oakes - Twitter @oakeslaw : LinkedIn https://ie.linkedin.com/in/peteroakes 
See full article at http://www.independent.ie/business/technology/news/irish-fintech-sector-is-banking-on-boom-34410257.html 

Editor's Note:  Irish readers will recall that many years ago Irish taxpayers could avail of a Special Saving Incentive Account (SSIA).  It was a type of interest-bearing account in Ireland. These accounts were available to open between 1 May 2001 and 30 April 2002, and featured a state-provided top-up of 25% of the sum deposited.  Whereas Individual Savings Accounts are a class of retail investment arrangements available to residents of the United Kingdom. ISAs qualify for a favourable tax status. Payments into the account are made from after-tax income. The account is exempt from income tax and capital gains tax on the investment returns, and no tax is payable on money withdrawn from the scheme either. Cash and a broad range of investments can be held within the arrangement, and there is no restriction on when or how much money can be withdrawn.  Although it is not a pension product, it can be a useful tool for retirement planning.

In this article Jordan Stodart, Co-Founder/CMO, Orca Money bring us up to speed on the UK's Innovative Finance ISA which is dedicated to peer-to-peer lending. Perhaps Ireland, following the past success of the SSIA, could consider a similar regime to the UK ISA regime.

Peer-to-Peer Lending + ISA = match made in heaven? Peer-to-Peer Lending (P2P) is becoming an even more attractive investment option with the introduction of the new Innovative Finance ISA (IFISA). But how will its introduction in April affect the P2P space? Will the investor number spike? How are existing firms gearing up for the change? Why should early adopters take the opportunity to invest? All will be explored. 

"The Innovative Finance ISA dedicated to peer-to-peer lending, is a game changer for millions of Brits who have suffered from poor returns since the financial crash. It signals that P2P lending has become a mainstream way for people to invest for their futures.’" Giles Andrews, Zopa Founder and CEO.

Low interest rates drive alternative investment.  The peer-to-peer lending industry has seen exponential growth in its 10 years. Last year saw a 106% increase in lent funds from Q3 2014 to Q3 2015 (UK P2P market) and with an expected industry value of almost £5bn in 2016 it could be a great opportunity for you to start increasing the returns you make on your capital.

When consultation commenced around the Innovative Finance ISA – also known as ‘Innovative ISA and ‘Peer-to-Peer ISA’ – it was clear change was on the horizon. In Summer 2015 the UK Government announced the inclusion of P2P investments in a new, ISA-wrapper, the IFISA. Here are the key takeaways from this announcement:

• IFISA arrives 6th April 2016
  
• £15,240 yearly allowance
  
• Allowance can be spread between available ISAs
  
• Peer-to-peer lenders can act as ISA Plan Managers without legally owning or co-owning the loans
  
• ISA transfers and withdrawals adapted to fit illiquid nature of P2P investments
  
• Only peer-to-peer lenders can offer Innovative Finance ISAs presently
  

The IFISA is helping position peer-to-peer lending as a viable alternative investment. How can the Innovative Finance ISA stimulate the industry and how will it work for the investor?

With this new tax environment, ISAs could be great for an investor's tax-efficient portfolio. Firstly, from April 6th almost all UK adults will be able to earn £500 or £1,000 interest tax free (depending on their tax bracket) with their personal savings allowance. If this is added to the couple’s allowance of £30,480 which can be held in an ISA, plus a top-up of £10,000 at an average peer-to-peer lending rate of 5%, it looks possible that an investor could achieve returns of over £2,000 per annum through an Innovative Finance ISA.

It’s important to assess the risk involved in a peer-to-peer investment as P2P lending is not covered by the UK's financial compensation scheme and you could lose all your money notwithstanding that these products are regulated by the UK's Financial Conduct Authority. 
Risk of P2P default is the number one concern. Borrowers could default on their loan repayments, and an investor could lose their money. However, P2P platforms implement security measures to mitigate this risk. Some key mitigation procedures are:

• Diversification – capital is split between numerous borrowers, often around 100.
  
• Asset security – some P2P platforms hold borrower’ assets over the loan, which can be sold if the repayments stop, thus paying back the investor.
  
• Provision fund – many P2P platforms hold back funds in a fund which pays out, at the discretion of the Directors typically, when a borrower defaults.
  

The Financial Times's FTAdviser published statistics last year gathered by Consumer Intelligence relating to the introduction of the Innovative Finance ISA.  The findings included:

• 1 in 5 of 1,020 UK adults say they will save in an ISA henceforth.
• 89% say they will seek to take advantage of the changes in ISA regulation. 
• 405,000 new P2P investors expected with introduction IFISA.
  

It is important to research peer-to-peer lending before you commit to a given platform and product. You can  compare UK peer-to-peer platforms and their risk mitigation procedures here. Orca Money has also created a handy guide to P2P lending.  Find out more about the mechanics of the Innovative Finance ISA and how it works here.

Jordan is a FinTech enthusiast and co-founder of UK’s no.1 peer-to-peer lending comparison service, where the everyday person can research, compare and feel empowered to invest and earn more money on their money. [email protected]

31/12/2015: Great to be included at number 56 in the "Fintech 2015: Top 100 Influencers and Brands".  Really happy that we are helping put Ireland on the international fintech scene.

Onalytica, an independent body, were very interested in seeing which fintech professionals and brands were driving engagement within the fintech community.  It analysed over 482,000 tweets containing the word “fintech” and identified the top 100 most influential brands and individuals leading the discussion on Twitter.  Fintech Ireland was ranked number 56 in the Top 100 fintech brands.

A full copy of the report is available here.

"We analyzed Social Media conversations around Fintech together with qualitative research to uncover the most influential brands driving the conversation. Download to see the full analysis and discover who ranks among the top most influential individuals and brands" Onalytica.com

Joe Lavelle ([email protected]) writes on Fintech incubators and opportunities for Ireland for www.fintechireland.com.  A chartered account and payments sector regulatory consultant, Joe  specialises in successfully establishing FinTech entities in Ireland, the UK and Malta as authorised financial institutions .

The global FinTech sector has experienced rapid growth with the investment in FinTech start-ups resulting in the introduction of niche technologies producing unique service offerings tailored to specific consumer and business needs. Successful entities have benefited greatly from Government support while the existing large payment sector players are choosing to adapt and work alongside these start-up enterprises with a view to embracing their model and supporting their innovative approach by supporting “incubators” to nurture start-up entities through their early stage development. Such initiatives have in many instances also received the support of Financial Regulators such as the approach adopted by the UK Financial Conduct Authority “FCA” who have played a key role in ensuring a practical approach to complex financial regulatory compliance obligations which for these low risk classified start-up Companies can prove to be a major hurdle.

Incubators have to date provided startups with invaluable support through mentoring, support services, stakeholder connections and investment in research and development.  Developing, testing and researching is key to assessing any opportunity with new ideas taking an average of 100 days to pass through innovation funnels such as that at Visa. Dublin has long been renowned for its commitment to investment and ability to attract research and development opportunities while the Irish English speaking labour force has achieved global recognition for its high degree of skill and expertise in areas such as technology and finance and support services such as IT hosting. The rapid innovation in the FinTech sector presents the perfect opportunity for Ireland to become a significant hub for attracting the high potential FinTech Companies. Ireland has successfully attracted technology giants such as Facebook, Google and Airbnb however it has been noted to “lag behind” in its ability to attract and nurture FinTech Companies by failing to adopt a “joined up strategy” that would encompass private business, Government Agencies and the Regulatory Authorities.

In a recent interview David Page, Innovation Partner at Visa Europe Collab outlined his views on the important role of FinTech incubators and indicated where the emerging European capitals of FinTech were located. According to Page the established innovation hubs include London, Berlin, and Tel Aviv noting that London has being highly successful in becoming recognised as one of the global capitals for FinTech innovation supported by its practical approach to financial regulation,  strong startup community in Tech City, early-stage investors and government support allowing new FinTech businesses to thrive. Israel is widely considered to be the ‘startup nation’, with more startups per capita than any other region globally while Berlin which is seen as slightly different as “a creativity hotspot”. Stockholm is becoming the FinTech capital in the Nordics while there are some exciting startups coming out of Barcelona. This trend indicates the significant opportunity for Ireland, in particular Dublin, to join this innovation race and become one of the leading FinTech capitals in the world.

The strong FinTech incubator presence in London, Tel Aviv, Stockholm and Berlin demonstrates the significant opportunity for Dublin (as well as Cork, Limerick, Galway and our cousins in the north - Belfast) to attract high potential start-up FinTech businesses however, if this is to be achieved the approach taken by the government and regulatory authorities will be a major factor in determining if Ireland will indeed be successful in joining in the emergence of this truly innovative FinTech race which is transforming the way global citizens pay for goods and services by exploring technologies to innovate the payments sector.

www.fintechireland.com