Fintech and Brexit

Fintech and Brexit
Caroline Baldwin   by Caroline Baldwin. Published: 29/06/2017

At this week’s “The Future of Fintech” event hosted by BITA, panels of speakers gave their particular insights into the Fintech industry in Ireland and UK, and further afield with a particular emphasis on the impact of Brexit on sector trends, outlooks and opportunities.

John Colgan, CEO at Solgari, commented on the growing trend of large incumbent financial institutions to replace their innovation and R&D budgets with M&A Budgets. They are slowly recognising that buying a small niche organisation that has developed specialist technologies that can meet pieces of their overall technology and customer requirements is far more efficient in both money and resource than trying to create this technology in-house.

The panel speaking to the RegTech industry were unanimous in their view that Brexit holds myriad opportunities for RegTech. Simply put, regulatory change on this scale requires major technological innovation, input and development. Even today, 15% of large financial institutions costs are mired in regulation and compliance. John Bynre, CEO Corlytics believes that Ireland’s advantage lies in the RegTech talent cluster that has developed here going right back to the Norkom days.

For me, some of the most interesting insights were shared by Anna Scally, International Tax Partner with KPMG. Anna also is KPMG’s Head of Technology and Media and their FinTech Lead in Ireland. She referred to KPMG’s quarterly “Pulse of Fintech” which, as its title intimates, measures trends in funding and investment activity in the sector. The UK continues to hold position as the world’s financial capital. The UK’s Fintech sector’s continued activity over the past four quarters, also indicates that, so far any Brexit related uncertainty has not negatively impacted the flow of transactions in the sector there. Anna was quick to point out that the next Quarters results soon to be released will be critical in assessing whether this trend is set to continue.

In addition, the volume and value of deals seem to be realigning to more traditional Fintech activity in payments and loans. Investors feel safer around well-tested consumer requirements and also, are more cautious in looking for well-defined business models and well-developed executive talent in their leadership teams.

Specifically on Ireland in the same quarter, KPMG reports that Ireland continued to grow as a Fintech centre with notably Fenergo’s announcement in March of this year to expand, creating 200 jobs over the next 12-18 months. In addition, regional office set-ups of overseas firms such as Kabbage were announced.

In FinTech as in overall Financial Services, the expectation remains that Ireland should benefit from Brexit in its position as a potential bridge location to both the UK and Europe. Whether this expectation is realised, remains to be proven. Ireland as a Fintech location, as with all sectors, still needs to be a viable and competitive option when it comes to socio-economic factors such as high rates of personal taxation, lack of schooling and housing as well as the availability of the right leadership talent to entice companies to locate here.