This was first published June 29, 2015 by Adrian Marples of Alternatives Elect.  Our thanks to Adrian for allowing us to upload this informative piece on fintech.

After years of one-way traffic, the Irish Financial Services & Fintech outlook for 2015 is promising. Senior Irish financial executives, and bankers in particular, are returning to Dublin. They will face a changed landscape with recent employment headlines centred all too often around the proliferating FinTech sector, or larger firms using Ireland for a data or cyber security hub.

However, the tide across the more traditional financial services sector is turning. Credit Suisse is currently seeking regulatory approval in Dublin ahead of relocating its European prime services business from London. This is major news for Dublin. This is a significant, risk-taking business, a world away from the back office operations which have become the mainstay that populate the banks of the Liffey. Whilst Credit Suisse’s competitors will been watching this closely, many of them are already quietly moving other roles to Dublin, some of them much further up the value chain, under the radar on a piecemeal basis.

For well compensated Irish expats in particular, these developments present opportunities to return home.  There is an increase in senior financial services talent returning to Dublin for the first time since the crisis. Senior bankers can now return to Ireland without suffering the eye-watering pay cuts that were on offer a couple of years ago.

Earlier this year, the Irish government outlined an initiative to increase jobs in the IFSC by 10,000 within 5 years. Dublin has slipped drastically in rankings compiled for the Global Financial Centres Index, from 10th in 2009 to 70th in 2014. The flight of banks like Commerzbank and Goldman Sachs during the recession years didn’t help Ireland’s ability to lure marquee talent to the docklands.

Banks are now under intense pressure to cut costs in the face of increased regulation and lower profits from their investment banking arms. Many international banks already have a presence in Ireland, either for tax reasons or to house their fund administration businesses, so logistics are considered favourable.

Ireland presents a strong proposition for financial services firms. We occupy the same strategically important time zone as London and there is a much vaunted, well educated, English speaking work force. Critically, there are much lower real estate and labour costs than competitor banking hubs.

There are other pressures causing the return in demand for talent: a skills shortage exists, particular in the regulatory space, as firms adapt to the rigours of the Single Supervisory Mechanism. Both domestic and international banks will pay a premium for experience gained outside Ireland across risk, analytics, cyber security, audit and compliance.

Whilst it remains to be seen whether other international banks follow the bold steps of Credit Suisse, the prospects for the FinTech sector look altogether more assured. A combination of factors, such as legacy technology issues and regulatory headaches for mainstream financial services firms, are causing bountiful opportunities to firms operating in this sector right now. Looking to the future, there is also the widespread expectation that a new generation of customers will gradually turn away from one-stop shops and opt for single channel providers for their financial products.

From a talent perspective the challenge for these firms will be to mature from a strong technology proposition to a more wholly structured and institutionalized business. As businesses mature, there will be a requirement for fresh talent to populate new CEO / COO positions as firms adjust to the operational demands which come with scale, whilst a Commercial Director will be required to drive sales in new markets.

After several years where compliance and non-core businesses dominated the agenda we can hopefully look forward to a new era of growth across both the traditional financial services and Fin Tech industry. The shadow of the regulator will never be far away but current trends suggest significant cause for optimism.

www.fintechireland.com

Getting to grips with Ireland’s Fintech Advantage
Mastering the basics is the difference between Ireland achieving premier league or second division status as a Fintech hub 

Irish Minister Simon Harris TD [Mr Harris is Minister of State at the Departments of Finance, Public Expenditure and the Department of the Taoiseach, with special responsibility for International Financial Services] This Open-Ed by the Minister is available in pdf format here.

Recent weeks have seen the business pages of this paper and others peppered with encouraging signs on the financial services front.

Realex acquired by Global Payments for €115m, Currency Fair raising €10m on the markets to fund their further expansion, Sentenial launching their Nuapay service as a bank alternative for business customers, while last week Marsh McLennan added 100 high-skilled jobs to their workforce with the creation of a Fintech Innovation Centre.

In isolation they are a series of Irish and IDA-supported companies cutting a swathe on the fast moving Fintech scene, and this is to be welcomed.

Together they represent something considerably more. Something I am acutely aware of and actively addressing in the context my responsibility to advance the Government's International Financial Services' Strategy, IFS2020.

Together they represent a valuable niche in the international marketplace Ireland can really put its stamp on. Taking on the mantle of a premier global Fintech hub is an opportunity that requires an alignment and leveraging of the many advantages Ireland has worked long and hard to achieve.

Our proximity and strong links to the City of London, our place at the heart of the Eurozone, our recognition as a leading European Financial Services Centre, and our deep cultural and commercial ties with the US situate Ireland as a nexus and hub for transatlantic financial services' activity.

Our big tech and big data advantages are many. The company listings, spanning Apple to Zynga, reads like a who's who in the ICT hall of fame. While Amazon, Microsoft, Google, and Apple setting up data centres across the country prove that Irish clouds really do have a silver lining.

These human and capital votes of confidence in Ireland lend both the critical mass and fertile hinterland around which indigenous companies can cluster, thrive and expand as either direct service providers or emerging out from a vibrant ICT community and start-up cultural.

A third element, and indeed the catalyst behind the inexorable rise of Fintech on the global stage, is that financial services and ICT are increasingly two sides of the same coin. A look around Citi's Dublin Innovation Lab bears scant resemblance to traditional conceptions of what one would term a bank, while Apple Pay and Google Wallet assert these tech companies' advance as dominant players in the areas of mobile banking and merchant services.

To borrow the words of O'Casey's Captain Boyle, the financial services' world is truly in a 'terrible state o' chassis'. In business and tech circles this 'disruption' is challenging every aspect of financial services. In many cases previous providers of ICT services to established banks, insurance companies, and investment houses have decided to cut out the middleman and go straight to the consumer and business customer.

Likewise, established financial service providers, conscious of the changing landscape, are working hard to catch up. Some by way of acquisition of or partnering with tech companies, others by way of stimulating an entrepreneurial spirit and start-up culture amongst their workforce and organisational structures.

All in all, challenging and interesting times.

Since taking up my role as Minister of State for International Financial Services, my first challenge has been to better co-ordinate our Public Sector to be more responsive and alive to current and future trends.

In the course of my consultations with industry my Damascus moment was a visit to the Enterprise Ireland stand at Paddy Cosgrave's Web Summit last November. The energy and ambition radiated by these Fintech entrepreneurs was contagious, and confirmed for me that this was an area to be overlooked at one's peril.

Since that day I have made it my priority to work to foster and develop Ireland's Fintech and innovation ecosystems.

This includes, in the near term, implementing several cross-cutting measures to foster a pipeline of talent, to open up access to funding and expertise for Irish startups, and to work with other stakeholders to address the pressing need for enterprise space - both for startups looking for a first foot on the ladder and established SMEs eager to expand.

In the two months since launching the IFS2020 Strategy I have been impressed by the responsiveness of the public sector to come together to propose options and avenues to advance these measures, and by industry's openness to find a common ground so as to better communicate with Government and ensure that Ireland can compete in an increasingly competitive market place for ideas, drive and talent.

I am firmly of the view that getting to grips with the basics of communication and collaboration will unleash our potential to allow us outshine competitor locations as a destination of choice.

Recently the Taoiseach pointed out that bringing our unemployment down from 15pc to under 10pc was a massive undertaking to undo the failures of past administrations, and that moving from below 10pc to full employment is an equally difficult and important task of responsible Government.

I am convinced that Fintech is such a route beyond recovery to a sustainable and prosperous future. The task of Government is now one of continuing to deliver sure-footed policy in tandem with a robust and responsive regulatory regime to ensure that an innovative, expanding and highly-prized sector can thrive in line with our innate and cultivated advantages.

Positioning and promoting Ireland as a pre-eminent Fintech hub is a step in that direction.

END


Fintech Ireland FintechIreland

Yesterday we published Peter Oakes' presentation on fintech at the Financial Services Ireland event in Dublin.  Mr Oakes' presentation is here.

Earlier today (29 May 2015) the Central Bank published the speech given yesterday by Bernard Sheridan, Director of Consumer Protection at the Central Bank of Ireland.  Click here for the speech.

A couple of points to note, Mr Oakes and Mr Sheridan were on a four person panel together with Colm Lyons (PaywithFire), and hosted by Marc Coleman, Director of Financial Services Ireland.  As the event was a private event we will not disclose the content of discussions but rather point to information in the public domain.  

A few points to note:

• Mr Oakes and Mr Sheridan are former colleagues at the Central Bank of Ireland where Mr Oakes was the Director of Enforcement and Financial Crime and Mr Sheridan is Director of Consumer Protection.  Mr Oakes was a member of the Senior Management (Leadership) Committee and also sat on the Policy and Supervisory Risk Committees of the Central Bank together with being members of other Central Bank fora.  
  
• In an article appearing in the Sunday Business Post on 12 April 2015, Mr Oakes was quoted as saying 

1. 'The perception is that the Central Bank is not a great regulator to deal with from the startup scene, or if you’re moving into the financially regulated space,” said Peter Oakes, who is driving the Fintech Ireland project'.
   
2. 'People feel there’s no clarity around timelines to get regulated. That hurts us in two ways. One, people will drop out and choose another jurisdiction, and two, rumours and stories are going around international financial markets that it’s best to avoid Ireland.'
   
3. 'Every jurisdiction in fintech is going to have its own angle, but unless Ireland is out there telling its story, nobody’s going to know about it, and we’re not going to get the business. That’s the real issue.'
   

• See our previous post here and click here for a copy of the article in the Sunday Business Post (twitter @jackhojo)

• The above points were addressed by the Central Bank in its speech.  Our feedback together with that of others has been heard by the Central Bank and yesterday's statements are very reassuring. If you are interested in the Central Bank's authorisation process and how it relates to Fintech, note the following from the Central Bank:

• "Our authorisation process is subject to on-going review and we have been considering how we can move to a more effective and facilitative approach to progressing applications which meet the authorisation standards.  Feedback received from a number of sources has been useful in helping us review and refine our approach.  We have identified a number of key principles to underpin our authorisation approach and specific areas which we believe will assist us in moving to a speedier, more streamlined and effective authorisation model including:

1. Accessibility – we will be offering potential applicants the option of an initial meeting with us to discuss the application process and key areas that need to be addressed in any formal application. This is designed to enable firms to focus on making their formal application rather than engaging with us on specific details in a pre-application process. We will also continue to deal with questions/queries from applicants during the authorisation process should they arise.
2. Transparency - we will be further streamlining the authorisation process to ensure that all applicants have a better sight and understanding regarding the authorisation process and, importantly, the stage that their application is at and the next steps in progressing the application.
3. Timelines – following the receipt of an application, we will be clearer with applicants on the expected timelines involved in reviewing their application.

• We will continue to review the effectiveness of this approach in order to ensure it is working to achieve all of our objectives."  HTML version of speech here
  

Slides from Peter Oakes' presentation (founder of Fintech Ireland*) at Financial Services Ireland  on 28 May 2015 are available here.  Peter covered topics of:

• What is FinTech
• How big is Fintech
• Recent regulatory developments in Australia, UK and Ireland
• A look at the impact of the Payment Services Directive and the number of e-money and Payment Institutions authorised in Europe 
• The way the Central Bank of Ireland looks at risk through PRISM
• Recent comments by former European Commissioner for Internal Market and Services (Charlie McCreevey) on what the Commission intended when it passed the PSD 

Thanks to the Financial Services Ireland for arranging this great event.   

*Fintech Ireland (CRO 523657) is registered with the Companies Registration Office

www.fintechireland.com

The IFS2020 Strategy for Ireland which covers fintech and payments includes an interesting Action Point which might be easily overlooked.  Under the heading Operational Metrics for Central Bank there appears a less than certain action point stating The Central Bank and Department of Finance will, in accordance with their respective legal roles, review the authorisation service standards reported by the Central Bank in 2015.  See page 28 of the IFS2020 Strategy available here. 

The United Kingdom Financial Conduct Authority publishes metrics on the authorisation of all categories of firms.  With respect to fintech firms, these generally fall under the Payment Services Directive (PSD), the E-Money Directive (EMD) and crowdfunding.  Depending on the specific crowdfunding model, the firm might be regulated under the Markets in Financial Instruments Directive or UK only crowdingfunding regulations.

The idea of metrics for authorisation is a great idea, but it is an idea that should have found light of day a long time ago. However a bigger issue needs to be addressed.  If Ireland is such a pro-business jurisdiction, at the cutting edge of quality financial services, a hotbed of tech savvy human resources and apparently a well functioning bank / other funding community, why do we have such a poor level of firms regulated in the fintech space? A point made by a number of industry experts is (1) Why does Ireland not have any regulated E-Money firms? and (2) a mere 11 regulated Payment Services firms?  The question has to be asked, Why is Ireland so unattractive to these type of fintech firms?  When one looks at Payment Services firms, the picture looks less than favourable in terms of growing these firms indigenously and attracting them to our shores.  Of the 11 regulated firms, 64% (i.e. seven) provide 'money remittance' (which was ably regulated under the former Central Bank Act 1997 regime), leaving only four firms providing what some might say are 'real' payment services firms and one of these firms is the payments firm for Ireland's 380 credit unions.  Ireland's Central Bank is on the record as warning about crowdfunding firms, whereas a more meaningful response would have been to engage the public on what Ireland could do to grow this alternative finance market in the wake of the banking crisis and the widely held belief that Irish banks are not lending to Irish entrepreneurs and small-to-medium size businesses. Furthermore, four of the 11 firms became regulated the day (1 November 2009) the Payment Services Regulations came into effect because they were already in business.  Of the seven that became regulated post November 2009, only two are authorised to provide 'real' payments services (no disrespect intended to money remittance firms!).

However by far the most stark statistic is that the Central Bank last authorised a Payments Services Firm in December 2013. And that was for, you guessed it, money remittance.

No one wants the Central Bank to repeat the mistakes of its past of poor regulatory knowledge, supervision, culture and resources.  However it was not payments firms, e-money firms, crowdfunders or digital currency firms that help cause the almighty crash, it was banks - and in particular just two to three of them.

The Central Bank may no longer have a statutory role to promote Ireland's financial services, but neither does it have the right to overlook the important role it has to play in stimulating business, jobs and the economy. After all, are these not some of the elements that promote its financial stability mandate?