A perfect storm of financial crisis and technological advances paved the way for a flurry of fintech activity. The sector has seen growing investment and is maturing as traditional finance houses wake up to the challenge of digital rivals.
Anna Scally, partner and head of KPMG’s fintech practice in Dublin, offers several explanations why the flurry of fintech activity is happening now.
“The model for traditional banking was turned on its head following the financial crisis and, combined with advances in technology, a clear path was made for startups and disruptors to enter the market and create compelling alternatives for how we ‘do’ financial services. Of course, innovation would have happened eventually but startups definitely helped shape the conversation for innovation in financial services and they certainly set the pace,” she says.
Scally expects to see fintech further in the spotlight during 2017, in response to the Payment Service Directive 2 (PSD2) in Europe and the commitment to open banking by other governments and regulators.
“This will likely bring increased investor interest in complementary technologies, such as data and analytics and among corporate investors, artificial intelligence [AI] will likely be a hot area for investment. Most major banks are keenly interested in finding ways to reduce costs and see fintech and AI as a key mechanism to achieve this,” she says.
Keith Fingleton, chief technology advisor for financial services with IDA Ireland, points out that financial services companies haven’t just woken up to innovation – some have been active in this space for some time.
Citi established a Dublin R&D lab as far back as 2009, in the teeth of the financial crisis. “Companies like AON, Marsh, AIG, MasterCard, MetLife and others are working on high-end technology and technologies like data analytics and blockchain in Ireland,” Fingleton adds.
He says Ireland is well suited to building a fintech ecosystem because it already has a nexus of financial services providers along with leading names in technology and social media, creating a kind of perfect storm of expertise.
“Most people think only about startups when they think about fintech, but multinationals based in Ireland are just as interested in the startup ecosystem. There are some very large players looking at a technology like blockchain. If a financial provider is looking for process efficiency, Ireland is a great location to do that,” he concludes.