The mystery of Ireland's 'missing' financial services startups

The ‘siloed’ nature of banks and the tech sector is holding back innovation.

By Gary Leyden Commercial Director, NDRC

IRELAND IS HOME to a booming financial services industry, today hosting major operations for some of the world’s biggest banks.

Beyond the obvious Irish examples, there are now dozens of the top banks with direct operations, offices, employees and activities in Ireland – largely focused in a small strip of land along the River Liffey.

The IFSC has been a catalyst in attracting some of the very best international financial institutions to Ireland, initially based on a value proposition around back-office efficiency but now on the proposition of a platform for innovation.

Between the IFSC on one side, and ‘Silicon docks’ on the other, a plethora of banks and technology companies are forging paths into the future.

Add in the likes of the M1 payments corridor north of Dublin, and similar, yet smaller, clusters in the likes of Galway, Kilkenny and Cork, and all the ingredients are in place. But are we, as a nation, truly capitalising on this?

A growing frustration at NDRC has been the apparent ‘siloed’ nature of our financial services community and our technology startup community.

Surely, bringing these two together could create a powerful force for innovation in financial services and create a uniquely Irish fintech ecosystem.

London, New York, Singapore and Frankfurt are cities already influencing the future of banking, Ireland – and Dublin in particular – has plenty of opportunity to exert some influence of its own.

We have seen significant interest in fintech companies recently, with Plynk’s successful raising of €25 million earlier this year just one example of that. Elsewhere Rubicoin raised €1.2 million in 2016, and a further €1.4 million this year.

But we are yet to truly see capitalisation on a key area of banking in which Dublin plays a global role: back-office activity.

What we do

The regulatory and compliance challenges that these companies face are significant (and homogenous) and could be greatly impacted by digital transformation.

Back-office banking is basically everything you don’t see, the behind-the-scenes running of a financial institution. That is what we do, in general, in Ireland.

Banks from far and wide run their back-office operations out of an area in Dublin smaller than a few square kilometres. Why, though, have so few startups emerged that are looking to disrupt this space?

Think about it. We have a major medtech and pharma cluster on the west coast of Ireland, with some of the largest global corporations operating out of the likes of Galway, Limerick and Mayo.

Startups emerge all the time, often housed within eyeshot of the multinationals where the entrepreneurs originated, developing their own devices and services to innovate the industry.

These entrepreneurs’ ideas often come from an attitude of frustration. From the inside, they can see how things can operate better, or how certain devices can make a marked change in their industry.

They break out, develop their idea and create viable businesses selling back into the industry from where they originated, or get bought up, sometimes by their former employers.

We have a similar cluster in Dublin, where medtech and pharma is largely substituted with financial services. So where are all the great ideas?

Thousands of people are employed by banks and other financial institutions in Dublin. They experience the good and the bad of how their businesses are run every single day.

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Those who see opportunity within the challenges they must work with, every day, are the people we want to hear from.

Going through the same tasks, almost automating a workday, isn’t always the answer for everybody. Sometimes, thinking outside the box can be.

At NDRC, we are running a specific fintech programme in the coming months to tap into that, to look for financial services professionals.

We know the problems are there, we know the frustration in the industry is there, we just need to see more good ideas emerge from within, or just outside, these large corporations.

All the ingredients are there to create a maelstrom of activity in this space. It’s important that people understand that the ecosystem is built to support ideation, entrepreneurship and startups.

The next €25 million investment into an Irish fintech company, this time looking at the back-office operations of banking, might not be too far away.

Gary Leyden is commercial director at NDRC.

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