FinTech has the potential to create massive gains, for investors and for consumers. To take advantage of this potential, the Irish Government is fostering growth in the sector by supporting FinTech hubs and other initiatives. In a report, Deloitte highlights the potential for Ireland, with 5,000 new jobs to be created in the sector by 2020. The firm notes however, that there are a number of aspects inhibiting full speed growth, citing among others legacy computer systems and the desire to develop talent.
The Irish economy has seen strong growth in recent years, which after the painful consequence of the financial crisis, now has many CEOs praising its bright future. To further improve on its outlook, the Minister of Finance Simon Harris announced a programme, entitled ‘Vision and Targets for International Financial Services (IFS) 2020’, which lays out investment in fostering the IFS industry in coming years. Where one aim of the programme is to create an additional 10,000 financial services jobs in Ireland in the coming five years.
To reach this target, one element of focus for the Irish Government is the development of financial technology (FinTech) companies by encouraging collaboration between Ireland’s IT and Financial Services (FS) sectors and by supporting the development of FinTech hubs and incubators in Ireland.
FinTech has been doing well in the UK and Ireland in recent years. According to the IFS 2020 report, Ireland and the UK have seen the volume of FinTech deals triple since 2011, with a five-year compound growth rate for FinTech financing twice the global average and twice that of Silicon Valley. Since 2013, the UK and Ireland together accounted for more than half of Europe’s FinTech deals (53%) and more than two-thirds of its total financing.
This activity has in turn boosted the ICT industry in Ireland, which now employs 37,000 people and generates €35 billion in exports annually. Part of this success is due to the past 8-10 years of development in FinTech as around 5,000 are currently employed directly in the sector.
While business development for FinTech in Ireland is good, there is room for improvement. Professional services firm Deloitte notes that there are a number of things holding back strong growth in the sector. One of the issues is that FS firms often still use legacy platforms and IT architectures, which makes the development and implementation of new generation technology difficult. According to Deloitte, this will change: “Gartner’s Worldwide IT Spending forecast recently suggested that IT spending will increase from $3.5 trillion to $4.5 trillion by 2018. This represents a huge opportunity for FinTech companies in Ireland.”
Besides technological bottlenecks, FS growth also faces difficulty in bringing together disruptors and innovators looking to capture FS market share and the old guard that have reigned in the industry. According to Deloitte, “The key challenge for FinTech in Ireland will be to support both disruptors and optimisers whilst guiding FS institutions to transform their business models and leverage the benefits of both.”
Other factors preventing further rapid growth to the FinTech industry, for which government policy may be effective, are the short supply of highly talented IT specialists and graduates; poor communication between large and new entrants; imitating best practice, with Ireland emulating the success of the top FinTech global hubs: London, New York and Berlin; stimulating investment in the FinTech industry, while high-tech companies attract 90% of all venture capital in Ireland, only around 3-10% has been invested in FinTech companies over the last 3 years; developing a cyber-security speciality; and marketing itself better – being well positioned in, language, location, time zone, cost and in the Eurozone.
Deloitte concludes that irrespective of the bottlenecks, there will be strong future development of Irish FinTech, with an increase of another 5,000 jobs in the coming five years.