transformative-impact-Irish-regtech Fintech News

The transformative impact of Irish regtech for global financial services

By Billy Hanley, Senior Development Advisor, Enterprise Ireland

As the world of finance gathered in Ireland for MoneyConf 2018, Enterprise Ireland — the Irish Government’s development agency and one of the world’s most active investors in fintech — launched a white paper on the transformative impact of regtech for the global financial services industry.

In a recent global survey of end-users in the financial services industry, 19% of respondents identified “meeting standards and regulatory policies” as one of their top challenges. The size of the problem is further exacerbated by the variance in regulations globally. According to Thomson Reuters’ Cost of Compliance Survey 2017, 67% of banks that participated in the survey expect an increase in compliance budgets to cater to regulatory pressure.

The cost of non-compliance

Estimates indicate that companies expect to spend 10% of revenue on compliance by 2022. Despite these efforts, many continue to pay hefty penalties for erroneous reporting and non-compliance.

Technology-enabled solutions from regtech providers offer companies an effective and efficient approach that creates a structure for them to improve regulatory adherence and enables an environment that is conducive to compliance.

A new white paper titled Beyond Compliance: Regtech Delivering Transformative Innovation Across Financial Services, commissioned by Enterprise Ireland, highlights the importance of regtech in promoting innovation and driving systemic change through its implementation within the industry. Regtech providers continue to exceed expectations as they enhance regulatory compliance and create opportunities for companies to achieve transformative operational efficiency.

“Regtech solutions are agile, secure and automated, thus simplifying the adherence procedures. These solutions can be integrated with existing systems and complement the current compliance teams,” said Deepali Sathe, ICT Senior Analyst at Frost & Sullivan, who produced the report for Enterprise Ireland. “The impact is visible with better compliance, reduced costs, and enhanced decision-making.”

The rapid growth of regtech

The regtech industry is expected to grow rapidly and total US $6.46 billion globally by 2020. The agility and flexibility enabled by regtech solutions will facilitate operational excellence and can also be extended to other activities within the organizations to promote a better understanding of the marketplace and clients. These advantages have been acknowledged by regulators who are increasingly working with regtech providers. Such collaboration will further encourage standardization and better risk management.

Ireland’s unique ecosystem is home to major operations for nine of the world’s top 10 tech companies and its home-grown small and medium enterprises are the most innovative in the EU. Ireland is also the fourth largest exporter of financial services in the EU and has developed a global reputation within the Investment & Funds industry, with over 40% of global hedge fund assets being serviced in Ireland. Ireland’s status as a financial hub is further evident in the fact that over 250 global financial services leaders have established a presence in the country.

Ireland is therefore well positioned to establish itself as a center of excellence for regtech solutions in financial services. Earlier this year, the Central Bank of Ireland announced plans to launch a fintech innovation hub, with the intention of engaging with all firms that are delivering innovation across the financial services sector.

Unique Irish regtech ecosystem

Irish regtech start-ups benefit from a uniquely vibrant and collaborative ecosystem, as well as the opportunity to develop, test and deploy solutions that work for global players. This resulting regulatory expertise is leveraged by Irish regtech companies such as Kyckr, Corlytics, Governor Software, Fenergo, and MyComplianceOffice, to help leading funds, banks and insurance companies worldwide deal efficiently with compliance, while also making better, data-driven management decisions.

With over 40% of global hedge fund assets serviced in Ireland, the resulting regulatory expertise is leveraged by Irish regtech companies to help leading funds, banks and insurance companies deal efficiently with compliance, while also making better, data-driven management decisions. An established sector of payments technology companies also has a strong track record of helping major banks and marketplaces to respond to rapid digitization and changing consumer demand.

Enterprise Ireland actively supports a portfolio of more than 1,500 companies with equity investments at any time, spanning almost all sectors, including large and small businesses, and what it defines as ‘High Potential Start-Ups’. Last year, Enterprise Ireland invested more than $35 million in over 200 companies, of which 90 were HPSUs.

As a state agency, Enterprise Ireland’s primary driver is unapologetically job growth, while other investors may focus exclusively on financial metrics. They are not, of course, mutually exclusive. Rather, they are two sides of one coin, a fact underscored by Enterprise Ireland’s strike-rate. Over a ten-year period, the agency’s fintech return on investment stands well above the industry average.

Ireland also benefits from an exceptional selection of international players. It is home to the operations of nine of the world’s top 10 technology companies, including Facebook, Google, and Amazon. That’s the ‘tech’ side. Ireland is also home to some of the biggest names in global financial services, from Bank of America Merrill Lynch to Barclays and Sumitomo Mitsui. Ireland is the fourth-largest exporter of financial services in the world.

With a committed Eurozone membership, extensive talent pool and dynamic innovation ecosystem, Ireland continues to reinforce its position as one of the world’s emerging fintech hubs. Irish regtech companies have established a world-class reputation for helping financial services customers to deal with the increasingly complex and rapidly evolving regulation – as well as continuous disruption and transformation – that characterizes the industry today.