The fintech and payments sector has performed strongly in recent years and growth within the sector has resulted in the rapid scaling of companies globally.

Ireland has become the EU/EMEA headquarters for many fintech and payments firms

With banks subject to higher regulatory requirements, fintech and payments companies are at the forefront of technological innovation in financial services. As such, the fintech and payments sector has grown at an unprecedented rate and spawned companies in verticals of the industry that did not even exist five or ten years ago. Verticals that have evolved over time include online payments and processing, cross-border payments, payment gateways, digital banking and digital remittances, open banking, regtech, blockchain and digital assets.

This unprecedented growth has created opportunity, and Ireland has been extremely successful in attracting investment in this area. Ireland is now home to many global players shaping the industry, including Mastercard, PayPal, Elavon, Stripe, Fiserv, Coinbase and Block to name just some. CB Insights’ Q1 2022 ‘State of Fintech’ report demonstrates this clearly, with the number of fintech unicorn ‘births’ in the country remaining at above 30 for the fifth consecutive quarter. This strong investment in Ireland is also driving partnership opportunities for established players with high-growth fintech companies and presents opportunity for M&A activity.

Furthermore, consumer trends toward online, mobile and contactless payments have been accelerated by Covid-19. This presents opportunities for organisations, merchants and retailers to increase revenues and win new customers by offering omnichannel payments solutions. Fintech and payments providers in Ireland are well-placed to capitalise on these trends and are delivering payments solutions to meet consumer and business demands. In addition, emerging payments trends, for example the buy now, pay later (BNPL) business model, could also present opportunities moving into the future. With so much opportunity, how is Ireland supporting the evolving landscape?

A landscape that continues to evolve

The progress of the payments landscape is by no means stalling – and the supporting infrastructure needs to keep pace with the constant change. For instance, the continued emergence of so-called digital/neo/challenger institutions has presented significant potential for Ireland to win investment. These technology focused businesses represent the future of banking and demonstrate the shift of consumer and business preferences towards personalised and multifunctional banking applications and services. As these companies compete against traditional banks, there will be further opportunities for Ireland to win investment as challenger institutions look to establish EU/EMEA headquarters and to access a broad pool of talent in areas such as operations, customer support, multilingual, technology and regulated activities.

Related to this is the prevalence of open banking that is creating new markets for consumers. Open banking is assisting traditional financial services companies and new disruptors with the data to drive the creation of services which were previously unavailable to consumers. In this regard, emerging areas such as digital/crypto assets, wealthtech/online brokerage and digital lending products may present further FDI investment opportunities for Ireland into the future.

Underpinning all these emerging areas is the evolving regulatory requirements. An example of this is the Markets in Crypto Assets (MiCA) and Digital Operational Resilience Act (DORA) regulations which will play a key role in enabling and supervising activity in the digital assets space, in addition to the Central Bank of Ireland’s ‘virtual asset service provider’ (VASP) regime which is already in existence.

Supporting emerging technologies

Over the past few years, fintech and payments companies have increasingly adopted the use of emerging technologies such as artificial intelligence (AI) and machine learning (ML) to develop products and services. AI is rapidly becoming an indispensable tool for the financial services industry. According to Insider Intelligence’s ‘AI in Banking’ report, most banks (80%) are aware of the potential benefits of AI. The opportunities that present themselves in this area are numerous, but AI solutions require careful control with the right balance to ensure they are robust and fair.

The range of uses of AI and machine learning in finance spans all business functions and sectors. In financial services alone, AI tools are already being used to improve customer service, customer segmentation, fraud prevention and credit scoring, to name just a few examples. To that end, these companies are leveraging Ireland’s leading position as a technology hub to access technology talent to shape the future of financial services.

Irish Research and Technology Centres are unique internationally as they are truly multidisciplinary, conduct foundational and applied research and deliver research outputs on industry timelines in co-funded collaborative projects. Research centres in Ireland include ADAPT, Insight, CeADAR and LERO. These centres are actively engaging with fintech and payments companies based in Ireland. The further advancements in technology and the investment in RD&I being made by these companies is having a profound effect on the ecosystem and is playing a key role in creating investment opportunity for Ireland.

Another emerging technology that has become increasingly prevalent within the fintech and payments sector is the use of blockchain. Whether pure play blockchain firms such as R3 or incumbents with large activity in this space such as Citi, investment in blockchain in Ireland has scaled in recent years. Touted as a technology that will revolutionise the sector, it is not surprising that the financial services industry has embraced blockchain – and Ireland has been positioning itself to meet industry demand.

Ireland at the forefront

Ireland has become the EU/EMEA headquarters for many world leaders in the fintech and payments space. Notwithstanding Brexit and the pressure it brought on companies to find an alternative regulatory home within the EU, Ireland is considered an attractive location for investment due to the availability and quality of talent. Ireland has evolved into a high value-add location for business activities. Increasingly, Ireland is seeking to compete with global financial centres for regulatory or middle and front office activities.

Some of the significant investment in recent years includes Mastercard’s plans to create 1,500 jobs and to build out its new European Technology Hub in Dublin across areas such as AI, cybersecurity, blockchain and user experience – as well as Stripe’s creation of 1,000 new jobs in Ireland to grow its European user base and launch new global products. These investments highlight the continued commitment by fintech and payments companies to invest in Ireland and to leverage regional locations to access talent. These investments demonstrate the breath of activities undertaken by companies in Ireland not only in regulatory functions, but also in operations, multilingual customer support, product development and engineering, among other areas.

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