Saturday 15 December 2018

Bright future for fintech after Fexco expansion

The sector has become big business here and market is growing across the country, writes Ailish O'Hora

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Ailish O'Hora

Enterprise Ireland has just closed a new fund targeting fintech and deep tech entrepreneurs and startups giving them access to up to €50,000 in equity funding. The successful firms went through a Dragons' Den type assessment in the past month, according to Enda McDonnell, head of fintech at Enterprise, Ireland - the State agency that has become the second-most active financial technology investor in the world by deal count.

"We've had an extremely strong response to the fintech and deep tech fund with a high number of applicants," he said.

"This reflects the vibrancy and ambition of the sector. The assessment process included a short investment pitch to an evaluation panel including external industry experts."

Included in the scope of the fund were entrepreneurs and startups covering sectors from payments and banking to cloud, blockchain and data intelligence.

The fund closure comes in a week that Kerry-based Fexco announced that it is creating 175 jobs at its headquarters in Killorglin.

The jobs, which will be created over the next three years, are in ICT engineering, software and sales to serve new product development opportunities for the group in Ireland.

Fexco already has 2,300 staff working across the company's Irish and international operations spanning 29 countries.

Fintech is a growing business, though, and is part of Ireland's financial services industry.

Enterprise Ireland, for example, has invested in more than 80 fintech startups since 2014 and its portfolio of over 200 fintechs generated €1bn in revenue in 2016, figures from the agency show.

But Ireland is also attracting fintech investment from abroad, according to IDA Ireland, the agency responsible for attracting foreign firms here.

And it is backing a newly established body - Blockchain Ireland.

This provide information on setting up a business in Ireland, as well as support and services for blockchain projects, events and an overview of the main domestic and international stakeholders in the blockchain ecosystem, according to the IDA.

"Ireland has a very compelling product offering for overseas fintech companies comprising the attractive business environment, deep talent and skills base, attractive corporate tax rate and the well-established international financial services and technology sectors, which provide commercial and partnership opportunities," said Kieran Donoghue, head of international financial services corporate strategy and public policy at IDA Ireland.

"Ireland also provides an attractive cash grant and taxation regime for developing financial technology and the related intellectual property.

"Companies can easily source technology skills from across Europe and all European passport holders can work in Ireland without a work permit or visa," he said.

He added that the Irish Government is treating the development of the fintech sector as a government priority, as evident from its strategy for developing Ireland's financial services sector, IFS 2020.

Donoghue said that fintech and payment companies in Ireland include multinationals such as Mastercard, PayPal, Circle, Elavon, Western Union and Stripe, while there is also a thriving Irish-owned fintech and payments sector including companies such as Fire Payments, Fexco, Currency Fair and TransferMate.

He added that the financial services sector, which includes fintech, makes a significant contribution to the economy, with €11bn in exports, 6.3pc of GDP and €2bn in tax receipts in 2016.

An estimated 6,500 people work in the fintech sector here but if one widens out the definition to include companies like PayPal, Citibank and Mastercard, as well as staff in the domestic banks, the figure is believed to be significantly higher.

This is a point echoed by David Dalton, partner and financial services lead for Deloitte in Ireland.

"The market has definitely grown in the past three to four years. Ireland has strengths which include good government support but other assistance is also necessary.

"It's really important, for example, that the Central Bank be supportive and we have seen signs of that more recently when it said it was establishing a fintech unit," he said.

He added that we should also see a Brexit boost but that might take a little more time as London-based fintechs are only now building their Brexit strategies.

"And more US fintechs are looking at Ireland as their European hubs," he said.

"Support is so important because fintechs can struggle to scale and engage with customers which are usually big financial services firms - the cultures are very different," Dalton added.

Ireland has already become a hub for a subsector of the fintech industry called regtech and these firms help financial services firms address regulatory challenges through innovative technology.

Other challenges for the industry include finding and retaining staff - the tight housing market makes it difficult for workers to find accommodation, especially in the capital.

"Because of staff shortages in Dublin, we would work with firms to find second strategies to look outside the capital - we have nine regional offices," he said.

"Obviously, Dublin and bigger towns are expensive - but there is the quality-of-life argument in other alternative locations.

"Our challenge is to showcase these opportunities and we do so, for example, by working with third levels in the regions.

"We can then link up that talent with our client companies," he added.

Other issues like poor broadband do arise, especially when you are looking at locations outside the capital, he said.

Enterprise Ireland also helps fintechs to source different types of talent and works with industry bodies to ensure they can link in with third-level colleges.

"Companies are also trying to create future pipelines of staff by working closely with third levels, we create the links," McDonnell said.

The body also facilitates Irish companies looking to compete with fintechs across the globe as it has 30 overseas offices, including New York and the West Coast.

"We would look at the business plan to ensure that firms are adequately funded and have the capability across the business to deliver what these big banks want."

Deloitte's Dalton added that many of these fintech companies are looking outside Dublin for their bases, given the infrastructural pressures in the capital.

"We are seeing that - they are looking further afield," he said. "

Fintech hubs are already showing signs of springing up outside the capital.

Just last month, New York-based blockchain firm Blockdaemon chose Galway as its first European base over Dublin.

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