The recently established Finance Innovation Group at Dublin City University hosted its inaugural quarterly symposium on Capital Markets and Fintech at DCU Alpha on Tuesday, 28th February.

Over 60 stakeholders operating in the financial services and technology sectors attended the one-day event to explore the future of banking, high frequency trading, cybersecurity and legal considerations for Fintech, and the opportunities and challenges for cloud adoption in the sector.

Comprising researchers from the Irish Centre for Cloud Computing and Commerce (IC4) and members of DCU Business School, the Finance Innovation Group at DCU was set up to support the Irish financial services industry on areas such as sustainable finance, capital markets, risk management, applied econometrics, corporate governance, cybersecurity and financial technology.

Presentations and panel discussions from leading industry and academic speakers provided insight into the financial services and Fintech landscape and focussed on the opportunities and challenges presented by the Capital Markets Union and Fintech.

Joan Mulvihill, recently appointed as director of the Irish Centre for Cloud Computing and Commerce (IC4), welcomed attendees and stressed the importance of continued academia and industry collaboration.

Mr. James Casey, Director, Investment Management & Banking KPMG, gave an overview and outlined the objective of Capital Markets Union.

Areas of Discussion:

  • What are the benefits of a Capital Markets Union? Why is it worth doing?
  • James discussed the action plan – 6 objectives outlined by the European commission in September 2015. Broaden range of financing options for SME’s, strengthen access to public markets, support infrastructure investment, facilitate Cross border investing.

Key Points

  • Think of the CMU as a series of small actions – 33 actions framed in 6 objectives.
  • The CMU is not about replacing bank financing but to offer an alternative.

Mr. Don Scott, Director in Regulatory Consulting, KPMG, continued that discussion and raised important questions…

  • Is CMU trying to do too much? Should it be more focused?
  • Is there a balance between rules and incentives?
  • What will be impact of Brexit?

Key Points

  • SME’s make up 80% of employees in Europe – very important that they can receive finance and grow.
  • CMU is trying to make a structural shift away from bank financing for these types of firms.
  • Moving from private investment to public funding – firms growing rapidly and continue to grow on public market – important for firms to be able to receive public funding in a less complex and challenging way.
  • Review regulatory barriers to SME admission on public markets.
  • Sticks and carrots – Rules and incentives – We have the rules but are there incentives?

Ms. Niamh Mulholland, Associate Director in Regulatory Consulting, KPMG, spoke about the major challenges of Brexit

Key Points

  • The major challenges of Brexit – Financial stability – London is the centre
  • Massive concentration risk – need to replicate this infrastructure across Europe – will take time and money.
  • “The perspective of the largest EU Capital market actually leaving the EU makes CMU even more urgent”.

Panel Discussion: Capital Markets Union – Opportunities and Challenges

What are the key benefits/opportunities from the CMU?

  • Opening the discussion on finance and finance structure
  • Opening opportunities to capital markets to get a better return – more competitive.
  • An opportunity to encourage higher levels of participation in capital markets – address issues with financial literacy.
  • Moving from bank finance to something more sustainable and distributed.

Irish Fintech Landscape Mr. Peter O’Halloran, Fintech Ireland

Key points:

  • Fintech investment – “$631 million was invested in Fintech in Ireland in 2015 which represented 22% of the $2.9 billion investment in Fintech across Europe in 2015”.

Dr. Eleonora Monaco, Senior Liaison Officer, ECMCRC, spoke about the impact of High Frequency Trading in Capital Markets

Key Points:

  • HFT may have some downsides but they are important for market liquidity.
  • Proposed solution – A machine learning approach to HFT and market microstructure
  • The views on HFT trading is mixed – upsides and downsides, may depend on your lenses – ie. Whether you are a large firm or SME.

The Blockchain Conundrum Mr. Cillian Leonowicz, Senior Manager, Consulting, Deloitte

Areas of Discussion:

  • Blockchain – What is it? Where it fits? Where it doesn’t fit. How does it work?
  • What does it enable? – Disintermediation, Shared trust, Decentralisation.
  • Examples – Sweden is putting all of its land registration on blockchain
  • Examples – Bitcoin. Ethereum, Hyperledger, Corda.

Key Points:

  • Is it hype? – No, but we are only on the first step of a very long journey.
  • Cillian identified sectors which could be disrupted by blockchain tech eg. settlement, proxy voting, corporate actions.

Cybersecurity and Fintech Mr. Jack Nagle, IC4

Key Points:

  • Cybercrime offences statistics – a lot of highly profitable crime is happening and the cost of breaches is getting higher and higher.
  • Security is a P.A.I.N. – Privacy, Authentication, Integrity and Non-repudiation.
  • Identified underlying risks in the Fintech industry – some of the same risk still exists and may in some cases be amplified.

PSD2:Mr. Killian Barry, Manager Accenture Strategy

Areas of Discussion:

  • What is PSD2?
  • Disruptive forces are combining to re-shape the banking industry.
  • PSD2 and open banking are acting as catalysts in driving change across the banking industry.
  • What use cases can emerge?

Key Points:

  • These new industry changes will create massive opportunities for non-bank market players.
  • What does this mean for incumbents? – 3 key threats

A loss of payments revenue

A loss of valuable customer touch points

Increased churn

  • There is a silver lining for banks – Opening up API’s will allow rapid innovation, window to new ecosystem = better customer outcomes and expanded distribution.

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