Why you should consider Ireland as a location for your fintech business

Ireland’s fintech sector has been growing strongly in recent years and shows no signs of stopping – and there are plenty of reasons why entrepreneurs should consider setting up their fintech business in the country.

When the Irish fintech business Prepaid Financial Services was bought by Australian rival EML Payments in March, it raised eyebrows across the world. The $162 million deal was the largest strategic M&A deal in the fintech sector globally in the first half of the year.

This huge acquisition was first revealed in November last year, but the COVID-19 pandemic sparked a renegotiation of terms before it closed in March.

But this was not the only big deal in the first half of the year involving an Irish fintech company. Other big deals announced included:

• AIB and First Data’s joint venture purchase of Payzone Ireland for $83.4 million
• Fenergo, a software company providing lifecycle and regulatory compliance technology, completed a funding round worth $80 million.

This was demonstrative of a record amount of activity in the Irish fintech sector in the six months to the end of June. In all, eight deals – a mix of mergers and acquisitions, private equity and venture capital – were completed, worth $328.6 million, according to the latest KPMG Pulse of Fintech H1’20, a bi-annual report tracking global fintech venture capital, private equity and M&A investment trends.

KPMG reported that transactions declined in number from the first half of 2019, where 14 took place, the amount they were worth grew markedly – worth $328.6 million, which is twice the amount deals were worth across the whole of last year, where there were 26 transactions worth $155.6 million was recorded.

These figures demonstrate how fintech – a portmanteau of ‘financial’ and ‘technology’ – companies in Ireland are leading the world currently.

Indeed, the company is attracting global fintech players to invest in the country. For instance, earlier in 2020, Mastercard unveiled proposals to grow its European Technology Hub at a new location in Leopardstown.

Interest in Irish fintech companies is expected to remain high for the rest of 2020 and into 2021, according to KPMG. Some of this will be driven by Brexit – the UK’s transition period with the EU ends on December 31 – with fintechs from the UK and around the world seeking to make sure they can work with their clients across Europe by establishing operations in Ireland.

In addition, the rise of digital payment methods – which has accelerated in 2020 due to the COVID-19 pandemic and the increased desire to use contactless payments – will continue to see fintech companies thrive in the short- to medium-term.

Attracting investment

With this in mind, it is unsurprising that Ireland’s fintech scene continues to attract investment. For instance, in February 2019, it was announced that a new €20 million venture capital fund aimed at fintech and tech start-up companies in Ireland was being set up in Dublin by multi-national venture capital business Finch Capital.

New funds such as this are helping to drive the commercialisation of new and innovative products and services from Irish companies, which can create real value – along with high quality jobs – in Ireland.

Indeed, Ireland has been a hub for fintech companies for some years – there is a buoyant start-up and incubator network for fintech businesses – and there are more than 150 companies involved in some aspect of fintech operating in the country.

This has been buoyed by The Payment Services Regulations 2018, which took away some of the obstacles that fintech businesses can experience when trying to enter the payment services market. It is probable that it will also bring about innovative fintech models as companies look to take advantage of new prospects.

Centre for investment

Ireland is expected to remain a centre of fintech investment in the coming years, especially in the wake of Brexit as companies look for a base to get frictionless access to businesses operating in the EU and the single market and the customs union.

The Irish government has also been backing the fintech industry for some years and treating the development of it as a high priority. This was shown with the appointment of Michael D’Arcy as the country’s first Minister of State at the Department of Finance with responsibility for fintech in June 2017.

Prior to this in 2015, the Irish Government launched a strategy that aimed to develop Ireland’s financial services sector internationally in the years to 2020 (IFS2020). A crucial part of this strategy was to promote fintech as a fast-growing part of the financial services sector.

For instance, IDA Ireland – the government agency charged with bringing overseas investment to the country – has helped attract big cash injections in the past few years from several significant American fintech players.

Elsewhere, Enterprise Ireland [www.enterprise-ireland.com] made 28 investments in 2018 alone and continued to be one of the most prolific investors in the sector in the country in subsequent years. It has its own fintech team working out of Dublin, which manages businesses that are looking to develop overseas. Enterprise Ireland has worked on various schemes to help the fintech sector in the country to expand, including trade missions across the world.

Why you should establish a fintech business in Ireland

There are many reasons why entrepreneurs should consider setting up a fintech business in Ireland, some of which have already been outlined, such as government support and plentiful number of investors in the sector. Other reasons to establish a fintech business in Ireland include:

• Plentiful support: Businesses in the fintech sector can call on various organisations, incubators and such like in the country to provide support
• Young, skilled and flexible workforce: The workforce in Ireland is generally well educated and there are specialist fintech qualifications offered by many Irish universities
• Favourable corporate tax regime: Corporate tax is just 12.5%
• Other tax incentives: Ireland has a range of favourable tax measures, such as relief on the cost of buying intellectual property
• Funding: There are a range of government and private funding options available, including some dedicated to fintech
• Competitive costs: Costs of doing business in Ireland – including commercial property rents, utilities costs etc – are competitive across the country and with other European countries
• International accessibility: There are five major airports in Ireland flying all over the world
• Established financial services industry: There are more than 400 financial services companies in Ireland employing some 40,000 people, which means there is an established infrastructure in place as well as expertise in the legal and advisory community.

Post-Brexit

Of course, another attraction of Ireland is that it is in the European Union. Advantages here include that Ireland is the only native English-speaking member of the EU and its currency is the Euro, which means there are no exchange fees or admin when trading with most other EU member countries.

Post-December 31, it should be noted that fintech firms authorised by the UK financial regulator won’t be able to passport into the EU. To qualify for EU passporting, these firms may have to relocate to an EU jurisdiction.

In addition, once the transition period has ended, the UK won’t be subject to EU rules on a range of other things, such as intellectual property and protecting data. This means there could be greater divergence and uncertainty in rules.

Setting up a fintech company in Ireland

Establishing a fintech business in Ireland is the same as it is for any other type of business – there is no specific regulatory structure for them.

Entrepreneurs must follow the standard registration procedure set out in the Companies Act. In addition, the business will need to be represented by a legal entity registered with the relevant authorities and comply with all the relevant tax regulations.

However, there are some regulations that do need to be adhered to. For instance, fintech companies that don’t provide services and don’t fall within what Irish law defines as a regulated activity fall outside of the regulatory framework. But if the fintech company is involved in regulated activities then they must get additional authorisation from the Central Bank of Ireland prior to starting operations.

Choosing to set up a fintech business in Ireland will require expert advice if the chances of it being successful are maximised. The Republic of Ireland may share a land border with the UK, but the business practices within the two countries can differ significantly, which can take business owners not native to the country unawares and as a result have an adverse impact on the chances of the business being successful. Taking expert local advice can make the difference between success and failure and make establishing a fintech business substantially smoother.