“There are not many places in the world where early stage companies can get the opportunity to engage with large MNC’s in a collegiate environment.”
In this instalment of Ireland’s FinTech Future blog series, we sit down with one of the founding members of the FPAI (FinTech and Payments Association of Ireland) – Anna Scally to find out about the Irish FinTech scene and how the FPAI is helping nurture collaboration within the sector. Anna is also an International Tax Partner, Head of Technology and Media and FinTech Lead at KPMG Ireland.
Tell us about the FPAI and what are its goals?
In September 2015, we launched the FinTech and Payments Association of Ireland (FPAI), of which I am a founding Director (alongside Colm Lyon of Pay with Fire (and formerly Realex Payments), Morgan Lynch of Senddr and Colm Rafferty of Maples and Calder.) Our primary function is to try to unify the industry and bring people from all areas of FinTech and Payments to the one table.
The FPAI is a trade association for all FinTech stakeholders who are involved in financial technology and payments in Ireland. Its main focus is to provide a catalyst for creating an environment in which both indigenous and multi-national FinTech and Payments companies can excel.
Businesses of all sizes and stages of development are encouraged to join: start-ups, scaling and international businesses are all welcome. During 2016, the Association was heavily engaged in contributing to the government’s International Financial Services Strategy (IFS 2020) and lead the way in creating the structures and dialogue needed to support the Fintech and Payments ecosystem.
In September 2016, Paul Kerley (ex Fenergo and Norkom) took over as Chair of the Association. Paul took over from Colm Lyon who served as the inaugural Chairman. Colm helped the Association to achieve so much in its first year and we are eternally grateful to him for that.
Three additional members from the industry joined the Board. Ruth McCarthy (Fexco), Mark Bonham (AirBnB) and Brian McCabe (State Street). Each of Ruth, Mark and Brian has been heavily involved in the association and its work prior to joining the board, each being chair of Working Groups established by the FPAI (more below on the working groups).
What do you think the FPAI has achieved so far and what are you hoping to achieve in the next 12 to 24 months?
The FPAI has achieved so much in the last 18 months. We have helped to provide a focal point for companies and other interested parties in the FinTech and Payments industries.
We have convened two Working Groups which have provided detailed and extensive input to Government, which has influenced Government priorities outlined in the IFS 2020 report. Those working groups are focussed on Payments and a broader FinTech Strategy for Ireland.
We also convened a very active Regulatory Special Interest Group (RIG), which has made 4 formal submissions during the year to the European Banking Authority (EBA), the Dept of Finance and the Central Bank of Ireland on regulatory issues including, the adoption of PSD2 and 4th Anti-Money Laundering Directive (AML4) – critical issues for the industry.
Over 90 members participated in those working groups – and I want to thank all of those who participated in 2016 as they provided real and critical industry insight into really important matters.
In addition, we hosted our first annual conference in April 2016. This was the largest gathering of FinTech stakeholders ever in Ireland. FinTech Nation brought together players from across the FinTech sector to discuss the state of FinTech in Ireland and its future.
We have provided a forum for individuals and businesses involved in the industry to meet-up and share industry insights through our programme of “Meet-ups” throughout the year.
All events are free to FPAI members. Irish tech companies and financial institutions are already working closely together to design new products and services. I think we have provided an important forum and an opportunity for stakeholders to meet and learn from one another in a mutually beneficial environment.
We have hosted a number of Partner Sessions, including one on Brexit. These sessions have provided an opportunity to the FPAI and its Working Groups to update members and Partners, including Enterprise Ireland (EI), International Development Agency (IDA), Central Bank of Ireland (CBI), Financial Services Ireland (FSI), Banking and Payments Federation Ireland (BPFI) and many others working in the industry, on what the association has been up to.
They’ve also provided a useful forum to share insights and help to ensure clarity on the role of each and minimise the risk of overlap dealing with various industry issues.
We have seen an acceleration in the sector over the past 18 months and Dublin can now credibly be listed as a growing centre for FinTech development. More and more Irish FinTech companies are gaining international recognition and are winning significant new business on the global stage.
As for the next 12 months, I would anticipate that our working groups will continue the excellent work that they have been undertaking. Some of the initiatives will stem from IFS2020 and the priorities outlined. A number of the initiatives will fall outside of that.
The FPAI’s plan for 2017 is extensive. We want to accelerate our industry engagement programme. We want to continue to be the go-to place for Government and other interested parties to hear from industry about what is important for FinTech and Payments companies operating here in Ireland.
We want to continue to be an important link between industry and the various and relevant institutions of the State (CBI, Department of Finance etc).
We want to continue to work to ensure that Ireland continues its development as a centre for FinTech and Payment companies to grow their businesses. We will also continue our outreach globally.
It is important to point out that our members include large domestic and international financial institutions, large Tech US MNC’s with FinTech offerings, and both domestic and international emerging and growing Fintech and Payments companies.
The FPAI have made a number of submissions to the government as part of public consultations including that on Tax and Entrepreneurship and Share-Based Remuneration. What was the outcome of those submissions and do you think the environment is now better in terms of investment as well as starting and growing FinTech businesses?
Yes, you are correct. In addition to the Payments Strategy, our submission on a FinTech Strategy for Ireland and our four submissions related to regulatory matters, we also responded to the consultations run by the Department of Finance in 2015 and 2016 on Tax and Entrepreneurship and Share-Based Remuneration.
Obviously, there were some moves on Capital Gains Tax (CGT), with certain changes made to the CGT Entrepreneurs Relief. But there is still a lot to be done there in order to ensure Ireland can compete on a par with the UK. The fact of the matter is many early stage companies fail, so we want to make sure that the environment is right to encourage entrepreneurs to be ambitious and be prepared to take risks even where the odds might be stacked against them.
Having an attractive CGT regime for those who succeed would help to create an environment that encourages entrepreneurs to be ambitious and push on even when things are really tough.
In relation to the consultation on Share-Based Remuneration, we were disappointed that the Minister did not make any changes in Budget 2016, but we do hope that suitable changes are made in 2017. Research shows that companies perform better where employee and corporate goals are aligned.
By enabling employees to participate and become shareholders in their companies in a manner that is both tax efficient on the way in and way out, could be really attractive. It would really help a number of early stage companies to hire and retain talent and encourage the employees to be a real part of growing and sharing in the success of those companies.
The FPAI hosted a number of FinTech focused events in Ireland last year including the FinTech Nation conference. Were these events a success and what have you planned for 2017?
The events have been a huge success. In particular, FinTech Nation (see above) which was the first and biggest meeting of FinTech players in Ireland. We hope to repeat that in 2017 and build on the success of our wide programme of stakeholder events; all of which bring together the industry’s major stakeholders to communicate and interact in an open forum.
In terms of legislation and regulation, what are the most important steps that you feel the Government/Central Bank/Regulator now need to take to ensure Dublin (and more generally, Ireland) continues to make progress toward being an important hub of global FinTech?
Two years ago, the Irish Government announced that FinTech would be a core component of IFS 2020, its strategy for developing the country’s financial services sector. The Government has acknowledged Ireland’s strengths in FinTech and the potential for economic growth and jobs offered by the sector is undeniable.
I believe Dublin has the ideal ecosystem to become a centre for FinTech innovation and development in Europe. Our financial services sector has recovered and we have an incredibly successful technology sector with a talented workforce. We must continue to provide proactive government support and the kind of environment that will support and encourage start-ups and enable the growth of significant world-class companies. It is also important to remain very attractive to international/FDI (Foreign Direct Investment) companies operating in this area.
On the payments side, we are keen to strengthen competitiveness in payments, improve the regulatory engagement in payments and promote innovation in payments. Having the right policies in place is key to delivering on these goals. Engagement with the Central Bank/Regulator has been extensive over the last 12 months and I expect this to continue, which is a really positive development.
On the FinTech side, it will be important to build on the very strong foundations that exist in the industry today. We want to facilitate the supporting of our start-up community and helping to enable the growth of companies of scale who can compete globally. We also want to ensure that international FDI are keen to locate FinTech and Payment operations here and it is important that Ireland continues to remain competitive in order to ensure that continues.
Some countries like Switzerland and the US are looking to bring in a special FinTech license which would allow FinTechs 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?
The Central Bank (of Ireland) has said that FinTech can have a really positive impact on consumers, through providing new and enhanced products and services and increasing choice, but it has also flagged that FinTech represents an important emerging challenge for supervisory authorities such as itself.
Other international bodies, including the G20/OECD (The Organisation for Economic Co-operation and Development) task force, have committed to examining the impact of FinTech on the market and financial stability. Given developments in the US and Switzerland, there is clearly a growing recognition among supervisory authorities to develop standards and provide appropriate frameworks for responsible product development in FinTech.
Critically, new standards must be monitored and enforced to protect consumers and financial stability, without impeding the appetite amongst FinTechs for innovation.
FinTech companies at different stages need different types of help and support. Could you perhaps talk through what needs to happen broadly at each stage. (e.g.) Seed stage, early stage and growth stage?
The lifecycle of FinTech companies is in many ways no different to that of any other new business and the challenges faced by most start-ups – from seed and incubation, through to growth and maturity – are universal. Raising funding, making the right business connections and leveraging relationships all come to the fore quite early on in a FinTech, however. Getting good advice from day one is key and setting your sights on the global picture is important.
Irish FinTech’s and FinTech’s located in Ireland have certain advantages. They need, and indeed do have, a global outlook from day 1 – and this can be really helpful in driving them to succeed.
The broader tech ecosystem here in Ireland is also really unique. There are not many places in the world where early stage companies can get the opportunity to engage with large MNC’s in a collegiate environment.
The fact that we also have a thriving international financial services sector and our domestic banks are taking a real and genuine interest in FinTech is really helpful too.
What do you think can be learned from the major FinTech hubs like New York, London and Singapore?
We are seeing a lot of FinTech diversification in these markets but in particular in Asia. There’s more activity around InsurTech, blockchain and data and analytics.
An emerging area that is starting to grow is RegTech — technologies that reduce the cost of regulatory compliance and improve risk outcomes for financial institutions. We know that Ireland has the core ingredients to become a global centre for FinTech innovation and growth and we can learn so much from major hubs like New York, London and Singapore.
FinTech is a disruptive, innovative and potentially significant game changer for the financial services industry in this country. On the plus side, Ireland, and in particular, Dublin, can confidently differentiate itself in terms of the relative ease of doing business here.
What effect, if any, do you see Brexit having on the Dublin tech scene in general but also specifically from a FinTech perspective? Do you feel it also throws up some opportunities?
FinTechs are certainly looking to Ireland ahead of the UK’s departure from Europe, and while the Central Bank has said it is too early to speculate on potential implications such as increases in applications for authorisation, it is clear that Ireland’s attractiveness in the sector remains very strong.
Many corporates are forging ahead with FinTech-related activities. Banks, financial institutions and insurance companies seem to be continuing to shift their view of FinTech companies as disruptors and competitors to one where they are viewed as partners and enablers. In recent months, the focus has been on creating opportunities to leverage FinTech, whether through direct investment, acquisition or the creation of innovation labs.
Outside of regulation, what are the wider steps in terms of the FinTech ecosystem we need to take as an industry (I’m talking about as individuals and companies) to ensure Ireland continues to grow as a FinTech hub?
Given the scale of the opportunity, there is intense global competition among countries and cities to establish themselves as hubs of excellence for FinTech. In Ireland, we have a 12.5% corporation tax rate – the lowest rate in Western Europe – and we offer start-up relief with a three-year exemption for new businesses where profits are less than €320k, with marginal relief where profits are below €480k. And we have a very competitive R&D Tax Credit regime.
But it’s not all about tax incentives. Ireland is home to entrepreneurs, innovators and business leaders in every sector and I think this has broad appeal for FinTechs looking to grow and expand. They choose Ireland for many different reasons but they each have one thing in common – a desire to succeed in a business-friendly European environment that’s great for business and great for living.
IDA Ireland provides advice, assistance, grant aid and incentives to international companies coming to Ireland. A wide range of supports are available from capital, employment and R&D grants, to support recruiting talent and finding office space. For international companies coming to Ireland, IDA Ireland will be the principal body responsible for providing assistance.
For entrepreneurs looking to come to Ireland to start their business, assistance is provided by Enterprise Ireland. Aside from equity and bank financing, Ireland has a vibrant angel and Venture Capital (VC) environment. Levels of angel and VC funding have increased significantly in recent years, particularly in financing and developing high-potential innovative companies.
The links between universities and companies are very strong too, and this can be of real benefit and very attractive to ambitious and cutting edge FinTechs.
Independent from the FPAI, what part can industry leaders like yourself take to help Dublin grow as a FinTech hub?
For me, it’s about calling out all the good reasons to do business in Ireland. And in the case of FinTech, we’re notably talking about Dublin’s strengths as a capital city.
I travel a lot to the US in particular to visit my clients, and these opportunities, together with KPMG’s global footprint also helps me to share the good news and reasons why FinTechs choose Ireland.
I know many do, but I think all industry leaders should look to their individual networks and connections and see how they can highlight Dublin on the international stage – be that through speaking at conferences or talking to the media – there’s a lot we can do to copper-fasten Dublin’s status as a FinTech hub with a strong commitment to Europe.