“Regulators need to start moving outside their historical comfort zones and, while still respecting their public interest roles, find ways to encourage and support FinTech startups”
Every early stage technology ecosystem needs grass roots organisations to help promote collaboration and communication. The FinTech sector in Ireland is no different. Today we talk with the founder of one such organisation, Peter Oakes of FinTech Ireland.
Q: So, Peter, you are the founder of FinTech Ireland, a grassroots organisation for Irish FinTech start-ups. For those who are not familiar with FinTech Ireland, can you briefly summarise what it is and what it is trying to achieve?
Fintech Ireland was established in August 2014 (and existed earlier as an informal group). I founded FinTech Ireland following my work at the Central Bank of Ireland. I think it surprised a few people to see a person who was Director of Enforcement at the Central Bank take an active interest in financial technology and business startups.
This, in turn, stirred my interest working as a non-executive director and advisor to FinTech companies in Ireland, UK and Denmark.
The idea behind FinTech Ireland is to help put Ireland on the global FinTech map. On this journey, I have been joined by some excellent collaborators in the form of Dave Anderson, Peter O’Halloran and Alex Lee.
A core foundation of its establishment was, and remains, to help local FinTech firms understand and navigate the regulatory requirements in Ireland and for those entrepreneurs looking to expand overseas, to help them with international introductions.
We connect FinTech firms with those looking to invest in them, we introduce them to mentors and potential business partners too. Work continues to evolve however Fintech Ireland remains a free service.
Q: What do you think FinTech Ireland has achieved so far and what are you hoping to achieve in the next 12 to 24 months?
The obvious thing we have done is successfully promote global interest in Ireland as a FinTech centre of excellence. During 2016 we received 80,000 visits to the website (www.fintechireland.com); we have a fantastic twitter base of @fintechireland followers (approaching 3,000); the LinkedIn Group will hit 1,000 members very shortly (once I get through the current batch of requests).
Oh yeah, we also ran and spoke at more than 20 events in Europe during 2016.
Looking forward to 2017, although the consequences of a hard Brexit on Ireland are not welcome, we are mobilising a group of talented people to promote Ireland as the international home of both regulated and unregulated FinTech (including InsurTech and RegTech). We are supported by volunteers and sponsors, so it’s important that the community appreciates that we need their help to support the community. There will be more events in 2017. The challenge is fitting them all in one year!
Q: FinTech Ireland has hosted a number of events in Ireland last year including the Copenhagen FinTech bridge event. Can you tell us a little bit more about that event and what it achieved?
Sure thing. As we say above, we ran and spoke at more than 20 events in Europe. We also travelled to the US and Australia to meet with FinTech hubs, investors and startups to become better informed. We hosted the Money2020 Europe lead-in event in Dublin in February 2016 and moderated the FinTech panel at Money2020 Europe in April in Denmark.
We ran two fantastic events on Brexit (in Dublin and Belfast) and a regulatory seminar for FinTech firms examining the impact of the new EU AML Directive.
The Fintech Ireland + Copenhagen Fintech (FintechBridge) event brought together, via video link, two great FinTech centres and showcased 10 firms (5 each from Ireland and Denmark) thanks to Dave Anderson. I think we had 70 or so people involved with the Ireland side of things.
The feedback from attendees in Dublin and Copenhagen was excellent. Expect to see more FintechBridge events in 2017. And please come along!
Q: What similar or other types of events do you plan on hosting in 2017?
Again, more FintechBridge events; events focussing on startups, RegTech and of course establishing FinTech businesses in Ireland. We would like to partner with more bodies/educational groups which share our community spirit.
In Ireland, we will roll out events in Galway, Cork, Limerick, Belfast and at other great FinTech hubs in Ireland. However, travel is a big part of what we do individually away from Fintech Ireland. I am over in the UK, Europe and further afield almost every month for business which gives me a great opportunity to promote Ireland.
Peter, Dave and Alex do likewise and they are full of ideas for 2017! I will also be developing Fintech UK in 2017.
Q: You were also involved in the FinTech 20 last year. Can you tell us exactly what the FinTech 20 is and who else was involved?
We were delighted to be involved with Irish Tech News (through Simon Cocking) and The Fintech 50 to help with The Fintech20 Ireland. It was held to acknowledge the buoyant Irish FinTech scene. Fifty plus fantastic Irish FinTech companies were deliberated over by a great panel to identify twenty FinTech companies which really stood out in 2016. It wasn’t a competition. It was not a judgement of future success. Rather it was a celebration of all things which are good about the FinTech community in Ireland.
I am delighted to have been asked to join the Fintech50 Panel in 2017 and we are meeting in February in London to start the process for this excellent European FinTech initiative. The Fintech50 will be announced in April and I am hoping that we will see a few Irish FinTech firms in the 50 hottest FinTechs in Europe.
Q: As part of your role in FinTech Ireland and your work in general, you must come into contact with a lot of indigenous Irish FinTech startups. Are there any in particular that you are especially excited about in terms of their potential to grow internationally to become a real success story?
It is really hard, and potentially unfair, to single out any particular FinTech company because you only know about the ones that you encounter; and even then you need to get under the skin of the business model to assess its potential. A catchy soundbite is one thing; a sustainable revolutionary business model is something completely different. Thus, I am going to pass on identifying any names.
What I am excited about are FinTech companies which will utilise artificial intelligence and machine learning (they are not the same!), whether they be pure FinServ tech or one of my favourite areas – RegTech. Take a look at Dave Anderson’s FinTech in Ireland map (shown below) which Fintech Ireland supports. It cannot be a complete list of all the great FinTech happening in Ireland, but it does give an excellent overview of the players in many important sectors. I work with a number of these companies, and I am very excited by their vision and execution.
Q: In terms of legislation and regulation, what are the three most important steps that you feel the Government/Central bank/Regulator needs to take to ensure Dublin (and more generally Ireland) continues to make progress toward being an important hub of global FinTech?
Not sure that we can boil this down to three important steps. But there are many ‘threes’ that Government and Regulators need to continue to appreciate. Firstly, when writing and administering financial services regulations they must be mindful that the nature, scale and complexity of FinTech offerings are totally different from those of traditional FinServ.
Secondly, although the written law is static, the application of the purpose of law is not. Regulators need to continually calibrate their regulatory oversight and supervisory approach to evolving FinTech models and do so in a fair, transparent and consistent manner.
Thirdly, Regulators and Central Banks care about three things, and quite rightly – financial stability, market integrity and consumer protection. However, saying ‘Yes’ to an evolutionary (or revolutionary) FinTech model doesn’t equate to eroding one or more of these safeguarding principles.
Regulators need to start moving outside their historical comfort zones and, while still respecting their public interest roles, find ways to encourage and support FinTech startups – whether it be by way of ‘sandboxes’, innovation hubs or simply getting out of their offices and into the real world to better appreciate how financial services are evolving around us.
We could write an essay here! As a former central banker, I can empathise with their conservative nature, but not with any mentality which immediately defaults to the position of ‘No’.
Q: Some countries like Switzerland are looking to bring in a special FinTech licence which would allow FinTech’s to provide financial services without any systemic risk to the overall financial system. Do you think this is a good idea and could it work in Ireland?
I am wary of headlines about jurisdictional special ‘fintech licences’. We need to appreciate that not every financial service is, in fact, a regulated one and nor should they be. This applies equally to FinTech offerings.
One needs to look at the service being provided and ask whether or not, regardless of how it is labelled, is a regulated service present? If it is not, then by offering a simple ‘FinTech’ licence we will restrict innovation by regulating a service which doesn’t impact financial stability, market integrity or consumer protection and arguably should not, therefore, be regulated.
There are a number of EEA countries which are attracting a lot of attention from simply announcing a ‘package of measures’, ranging from fast-track authorisations through to lower capital FinServ categories.
If you are a government or regulator you’d be mad to respond to each and every announcement from a ‘competitor’ regulator by tinkering with your regulatory model here and there. What Ireland needs is thoughtful and considered regulation which is administered fairly by industry experienced supervisors and not a race to the bottom competition.
Having said that Ireland must take heed of the cumulative effect of these pan-EEA announcements. If we look antiquated in the face of a perceived reformation of FinServ regulation in other EEA countries, then we better have a good narrative to hand explaining why it’s better to do business in Ireland. In addition to the Swiss announcement in November 2016, it is also worth noting that ‘a new kid on the block’, Lithuania, has introduced a low capital requirement for specialist banks and the bigger boys, in the form of Spain and France, have announced fast-tracking of authorisations.
Q: Do you think that our legislators and regulators are doing enough to help Dublin replicate the success we have seen in other FinTech hubs?
There are a lot of positives about the way legislators and regulators are thinking and starting to plan the future of a ‘Fintech Ireland’ narrative and strategy. However, in Ireland, it seems that there is not a lot of appetite to forge ahead with local standalone FinTech regulations.
Ireland comes across as being a country which would rather see the EU issue a directive under which Ireland enables local regulation than, for example, issue local crowdfunding laws as has happened in the UK and France.
Having said that, it was recently reported that the Central Bank Governor is “open-minded” about extending regulation to cover new financial technologies like crowdfunding . I guess time will tell.
The Irish government, particularly the former Minister of State (Simon Harris TD) and the new Minister of State (Eoghan Murphy TD), come across as very pragmatic and interested in how Ireland can grab a leading role in the convergence of technology and financial services.
They sponsored IFS 2020 and implemented various working groups to examine not only the opportunities for Ireland but also the threats to Ireland’s success in this competitive area. An open question for Ireland to think about is whether we should have a ‘Minister for Financial Services’ in the Cabinet. It would certainly be a game changer for Ireland locally and internationally, but it would be a much-debated decision.
The issue of ‘regulatory sandboxes’ continually raises its head in Ireland. “Ireland should adopt a sandbox because the UK has one!” is what we hear. I see merit in having a regulatory sandbox but not because someone else has one.
Yet the arguments I hear from people against the concept in Ireland is generally based on a misunderstanding of the policy and approach of those countries which have introduced them (e.g. UK, Australia, Malaysia, Hong Kong, Abu Dhabi and Singapore). What is unfortunate in Ireland, is that it seems that to get to ‘Yes’ for a sandbox (however it may look and feel), firstly means getting past a ‘No’. And that type of positional based thinking isn’t helpful. Let’s debate the issue, have an efficient public and industry consultation and reach a fair-minded conclusion.
Q: What do you think can be learned from the major FinTech hubs like New York, London and Singapore?
These three centres are major financial and economic hubs. We cannot really compare Ireland to these centres on a like for like basis. What I have personally learned from working in and travelling to those centres is that real innovation cannot exist in a disjointed and fragmented community.
It is logically perverse, but it does seem to be the case, that the larger the economy and ecosystem, the easier it is to get your voice heard and things achieved compared to smaller ones. This is something we need to think about carefully in Ireland.
We have a substantive international financial services sector. If we could better harness the talent of those working within that sector and design a consistent approach through which they could readily collaborate with startups, we could achieve a great deal of good.
And that doesn’t rest at the door of the Government and Regulators alone. Ireland’s large local and international financial services incumbents should be readily able to self-incentivise themselves. A few of them are doing so right now.
We have some great examples in Ireland of technology initiatives, hubs/accelerators and Government Agencies, just like in some other countries. One thing we need to focus upon in Ireland is keeping a close eye on these clusters so that they don’t become silos unto themselves and risk jeopardising the innovation potential of Ireland.
Q: What effect, if any, do you see Brexit having on the Dublin tech scene in general, but also specifically from a FinTech perspective?
It is way too early to gauge with any certainty the quantitative effect that the current status of Brexit will have upon Ireland in 1- 5 years. We all know that uncertainty and business strategy are poor bedfellows, and because of that, many businesses have made, and others will need to make, plans to relocate some of their pass portable services away from the UK.
No doubt Ireland will pick up part of this business. However, I think we will likely see some of the less capital intensive FinTech businesses initially move to Ireland. This includes payments, e-money and certain MiFID/Investment Services type activities.
Perhaps we could see one or two pan-EEA challenger banks establish themselves here. Judging by what my contacts in the insurance industry tell me, we should expect a slew of capital-intensive insurance companies arriving here.
These could lay the foundations for a prominent InsurTech industry in Ireland in the years to come, complementing the indigenous growth in our RegTech and FinTech offerings!
Q: Outside the work that the Government, Government bodies and the Regulator can take, what steps do we need to take as individuals, companies and organisations, to ensure Ireland continues to grow as a FinTech hub?
I think it is important to discuss, a little further, the areas of Government and State Bodies when answering this question.
At a government level, we need to continually encourage and support innovative business models. We need improved infrastructure and a meaningful housing policy, together with a tax system conducive to entrepreneurship (and their employees) and a well-educated and skilled workforce which is adaptable to the changing labour markets which lay ahead.
And although the Irish Government is making strides reducing bureaucracy, it could take a lot from the Gov initiative in the UK which is designed as a one-stop internet entry point to find government and information services.
From a regulatory perspective, we have pretty much covered most issues above.
State bodies, both inward FDI and national and local enterprise schemes, need to ensure that they work hand in glove. We may need to consider a redistribution of government funding when it comes to supporting Irish startups, especially those founded by overseas individuals who choose to relocate here.
We do a great job at attracting inward investment from international corporations, but I wonder if we could do more to help international individual entrepreneurs who may have an overseas track record but find it difficult when locating to Ireland to replicate that success.
This is not just about non-nationals – indeed we hear this from Irish folk returning home after spending a number of years overseas.
As individuals, companies and organisations, we need to take the opportunities in front of us and create our own. We live in a capitalist society. Companies nor individuals can sit back and wait for the government to address every blockage in the system or come up with business efficacy processes.
Companies need to invest their own capital, resources and time into strategic plans that not only drive their bottom line but which also add value to the FinTech community. Company executives and business experts could, as individuals, offer their services as mentors to startups.
Established businesses could support startups with administration, IT, operational and financial support. More professional services firms (lawyers and accountants) could dedicate a certain amount of time and staff each month to work at no/low cost for startups, either directly or through existing accelerators/hubs.
As a society, we need to move away from the concept that a business failure is always a negative thing.
We need to keep in mind that the success of a Fintech Ireland / Irish Fintech culture (call it what you will), depends on all of us being supportive of the other’s initiative.
Ireland does not need, nor should it have, just one voice for innovation, technology evolution and FinTech. This simply perpetuates ‘group-think’ which played a big role in our financial crisis.
Rather, we need multiple voices supporting a couple of key innovation messages for Ireland. In summary, either get behind an innovative Ireland or get out of the way!
For tomorrow’s Ireland’s FinTech Future interview we will be talking with Giles O’Neill of Enterprise Ireland who heads up their Financial Services division. EI is the government agency in Ireland responsible for supporting Irish businesses in the manufacturing and internationally traded service sector. Read Giles’ interview here