Financial technology companies are increasingly considering Irish headquarters ahead of the UK’s departure from Europe, but there are concerns the Irish regulatory system cannot reform itself fast enough to meet demand.
Brexit has pushed the issue into sharp focus with industry insiders saying companies will not wait out “political negotiations” but seek a quick move to an alternative European Union-passport holding country.
“It is now that we need to be ready,” said John Whelan, who leads the international technology practice at legal services company A&L Goodbody in San Francisco.
Mr Whelan told The Irish Times that financial services firms are increasingly reviewing which capital city to chose as a base following the referendum in the UK where the vote was to exit the EU.
“We are going to see a significant increase in activity in the fintech sector. We need to be sending a message to the multinational sector that Ireland is a good, safe, reliable and experienced regulator.”
However, the Central Bank has defended its preparedness with regard to the fintech sector pointing out its engagement in a number of different areas.
In a statement it said the consequences of Brexit would only be known in the months ahead.
“It is too early to speculate on potential implications such as increases in applications for authorisation,” it said.
“If necessary, the Central Bank will deploy staff to deal with increases in the authorisation pipeline and will reprioritise workload, as appropriate.”
What is certain is Ireland’s attractiveness in the sector. PwC’s recent financial services attractiveness indicator ranked Dublin as the second most attractive of the major European financial centres second to London.
It was ranked for strength of legal rights, ease of doing business, and talent.
A&L Goodbody’s view on the appeal of the EU regulation for companies is supported by the PwC survey.
“The UK’s potential loss of EU market access, including passporting benefits, poses great uncertainty in financial markets,” said Damian Neylin, the head of financial services at PwC.
“Brexit is causing many uncertainties. We are already seeing some UK financial services organisations making enquiries on relocating to Ireland and only time will tell how this will develop.”
In this new landscape, Mr Whelan said companies will plan ahead of political decisions in order to head off uncertainty.
He said there was an industry opinion the Irish regulatory environment needed to be reformed and improved quickly to attract migrating companies. In particular there is a need for greater certainty around legal obligations and for a more efficient and sophisticated regulatory regime.
The Central Bank has said it is engaged in a number of areas regarding fintech regulation.
“[This] work affects a wide range of financial services firms and therefore is cross-organisational in nature,” it said.
“This includes issues related to innovations in financial services generally and also authorisation applications for new firms wishing to establish in the jurisdiction.”
It said it was monitoring “wider implications” of fintech and its impacts on customers, payment systems and national economies. An internal group has been established to co-ordinate the sector.
The Central Bank also maintains an ongoing dialogue with the recently established Fintech and Payments Association of Ireland, the representative body for Ireland’s growing fintech sector,” it said.