An Abundance of Financial Innovation: An Interview with Fintech Ireland

FinTech Ireland has been championing the success of Irish financial technology firms since its unofficial launch in 2013. Today, it estimates there are 230 FinTech firms in the country, employing more than 7,000 people. We talk to its Founder, Peter Oakes, about the role of the regulators, the opportunities emerging from the Covid-19 pandemic, and why he’d like to see more collaboration in the future.

As the former Director of Enforcement and Financial Crime at the Central Bank of Ireland, Peter Oakes knows about the challenges facing financial technology (FinTech) startups better than most. That insight led Oakes to set up FinTech Ireland in 2013. “It really came about as a cry for help,” he says. “A lot of FinTech companies were approaching me to discuss difficulties they were having in understanding the authorisation process, not just in Ireland but also in other countries. Coming out of the financial crisis [of 2008], their business models now had to be regulated.”

Ireland has been described as ‘the Silicon Valley of FinTech’ and is currently the fourth largest exporter of financial services to Europe (soon to become third once the UK leaves the European Union). Over the past seven years, FinTech Ireland has developed into a free, independent network that advises young startups, and promotes the development of the country as a leading global FinTech centre. Oakes and the project’s Collaborators estimate there are at least 230 Irish FinTech firms, with the fastest growth driven by the payment, regulation technology (RegTech), and credit/lending sectors. “We can’t solve every problem for them,” Oakes says of the help they provide. “But we might be able to make one or two connections to give them a chance of some success. If we can do that, we’re delighted.”

According to research by EY, the Irish audience is open to innovative financial solutions, with almost three quarters (71%) of all Irish adults using some sort of FinTech service, versus a global average of 64%. There is still a lack of trust in the Irish banking system and unregulated products to contend with, Oakes says, but Irish consumers are becoming more financially digitally aware. “Ireland is a conservative country. We were decimated by the banking crisis of 2010 – there was a complete destruction of faith in banking institutions …  You won’t see a big uptake in Ireland in crypto assets at the moment, for example. [But] Ireland is certainly embracing the movement to digital innovation services.”

“What’s great to see is the Irish entrepreneurs who have gone overseas and had success, now setting up initiatives and programmes back in Ireland to help the next generation.”

That’s been particularly true during the Coronavirus pandemic, which though difficult for many businesses, has presented a number of opportunities for the FinTech sector. While the Irish public is spending less and paying off debt where they can, Oakes says, contactless payments (the limit for which was increased from €30 to €50)  and e-commerce transactions are booming. “That’s emboldened some of the FinTechs to think about setting up their own e-commerce platform or providing a payment service.” The downside is the local venture capitalist funding may not be there to turn these new ideas into reality. “Recent figures from the Irish Venture Capital Association found those that hadn’t yet secured their first round of funding were now not getting it … this is a ceiling we’ve got to break,” he adds.

One of the world’s biggest FinTech companies – Stripe – was founded by two brothers born in Limerick, John and Patrick Collison, and is now worth an estimated $35bn. Although they started the business in San Francisco, there is a sizable international engineering hub in Dublin, the fastest growing of its 14 international offices. “It shows other young Irish startups what is achievable,” Oakes says. “Regardless of your age [the Stripe brothers were born in 1990 and 1988 respectively], you can bring something to market if you see a need that’s not being serviced.” Other domestic success stories include Transfermate, which was started in Kilkenny and now has investors including Allied Irish Banks and ING, and strategic partnerships with the global bank Wells Gargo. “Being born in the regions shouldn’t stop you from scaling internationally,” Oakes says.

“We’re never going to replace the network on which banks do their business but what we can do is partner with them and offer them – and their customers – an innovative service”

“There are a number of Irish folk who’ve gone overseas and created their success, then brought it here, and others that have started here, haven’t been able to scale it properly and have gone overseas to find funding. It’s not just about the founder choosing where they want to scale their business or where they put most of their time and money into it. It also comes down to where the funding is available … [But] what’s great to see is the Irish entrepreneurs who have gone overseas and had success, now setting up initiatives and programmes back in Ireland to help the next generation.”

Collaboration is a key theme Oakes would like to see more of in the FinTech sector – both between startups and more established banks, and with regulators who are open to exploring opportunities outside of their comfort zones. The European Union has recently published its Digital Finance strategy to encourage responsible innovation in the financial sector that benefits consumers and businesses. “It’s great to finally see that,” Oakes says. “Just as the last financial crisis encouraged FinTech founders to set up these businesses, now the leaders in natural language processing, machine learning, artificial intelligence (AI), and virtual reality (VR) are now going to lead us into the next level [of FinTech innovation].” In London, for example, UBS is reportedly already experimenting with Microsoft VR headsets to recreate the experience of working on a busy trading floor for its remote teams.

As for whether regulators need to embrace a facilitative role so they don’t stand in the way of such progress, Oakes admits it’s a balancing act. “Regulation and central banking is about financial stability, market integrity, and it’s about protecting consumers, but technology is an enabler of all of those mandates. So I agree that the central banks and the regulators have to do more, including reaching out to innovative FinTech firms, but at the same time, it’s not carte blanche where they just hand out a license to anybody. They have a very important, independent role in terms of public policy and ensuring that something doesn’t happen to create another financial crisis.”

Rather than working in opposition with the established financial sector, he believes there’s more long-term potential to be found in working together. “I always say to FinTech startups: don’t sell yourself on the premise that you’re going to be putting somebody else out of business, that’s the wrong message. Look at examples like Stripe, Transfermate, Fexco, CurrencyFair and others, where they look for partnerships with the banks. We’re never going to replace the network on which banks do their business but what we can do is partner with them and offer them – and their customers – an innovative service.”