Ireland has an opportunity to become a pan-European location for fintech services activity but time-to-market issues need to be addressed first.
“We are at a kind of inflection point,” says Liam Flynn, co-head of Mason Hayes & Curran’s financial regulatory team. “If we are to embrace fintech as part of the growth strategy for the financial services sector we need to look at that issue.”
Mason Hayes & Curran is at the forefront of fintech advisory and transactional work, providing cutting-edge advice on the challenges and opportunities in this evolving area, according to his fellow co-head Rowena Fitzgerald.
“Our team brings together financial regulation, data privacy and IT legal experts, offering global expertise coupled with detailed industry insight,” she says.
That regulatory and technology expertise has helped drive strong growth in the firm in recent years. “Mason Hayes & Curran was the only one of Ireland’s big firms to actually grow last year,” says Flynn. “We are organised around our focus on the energy, technology, financial services, the built environment, and life sciences sectors, and we provide legal rigour served in an unstuffy, user-friendly and progressive way.”
Ireland has benefited from the growth in fintech in recent years, according to Fitzgerald. “The sector has exploded over the past five years and didn’t really exist 10 years ago. As a result of Brexit a lot of firms that would have picked the UK are now picking Ireland as a location. We have seen a lot more global players establishing in Ireland, particularly in the payments and e-money spaces. We help them to navigate the regulatory environment here.”
Insuretech is an up and coming segment, according to Flynn. “It is less well developed but we are seeing a lot of product-level innovation. Ireland is only starting out as an insuretech location. That’s a space where there is a huge opportunity for this country.”
Crypto activities
And then there is crypto. “People can get nervous of crypto,” he says. “But it is getting to the point where crypto assets and currencies are starting to penetrate established investment markets. We are receiving a lot of inquiries in relation to it, and there is a lot of interest globally in Ireland as a domicile for all sorts of crypto activities.”
Interest is one thing but translating it into growth is another. And that means dealing with the time-to-market issue.
“There are parts of fintech which are not regulated such as digitalising activity in non-regulated areas,” says Flynn. “But speed to market for regulated activities depends on the licensing turnaround by the Central Bank.”
“The Central Bank is quite a prudent regulator,” Fitzgerald adds. “That means it will put the time in to review applications and ensure people are fit to hold a licence. But tech companies are so fast-paced they can get frustrated with the process. However, once companies do have a licence in Ireland they find it easier to do business in Ireland. There is a good business environment and culture here.”
That very robust approach to licensing applications led some companies to choose to locate in countries like Luxembourg, Belgium and Malta instead of Ireland in the wake of Brexit. However, Flynn says there is an element of buyer’s remorse now among those firms as a result of talent and other issues.
Virtual asset
But Ireland is still likely to continue to lose out if the timing issue isn’t resolved. Flynn says the Netherlands has already issued licences to a number of virtual asset service providers while Ireland has issued none. There is also the issue of unpredictability of timelines with a Mifid (Markets in Financial Instruments Directive) application frequently taking twice as long to process as the six-month period guided.
Part of the issue could be that the Central Bank has no mandate other than to regulate. “There is a debate in the UK about giving regulators promotion of the financial services sector as a subsidiary part of their mandate,” says Flynn.
The innovative and early-stage nature of many firms in the sector should also be recognised. “The UK has introduced sandboxes for firms to road-test products and services. We don’t have that here. People need space to test and scale things up. It’s a long and difficult process to get a licence, and you don’t even know if your product will work.”
That said, the Central Bank’s reputation as a very robust regulator should be safeguarded.
“The Central Bank is a really good regulator,” says Flynn. “It has a very good reputation in Ireland and internationally for its standard of regulation and supervision. It’s as good as you’ll find anywhere in Europe. But if we want to be known as a jurisdiction for growth and innovation we have an issue to address in terms of speed to market.”