The COVID-19 pandemic has accelerated the use of financial technology (Fintech) by many financial services firms with existing Fintech companies having a clear head start on others.
Global digital developments
The increased apprehension regarding the use of cash and the encouragement from the World Health Organization to use contactless payments has expedited Fintech usage.
The increase in digital payments and a sharp rise in the use of mobile apps means that some Fintech apps are seeing a 72% surge in usage, according to new research published by deVere Group.
The shift towards digital financial services is forcing many traditional financial institutions to fast-track their digital innovation efforts.
Many Fintech companies have already come up with innovative solutions to help their client base during these difficult times. For example, Starling Bank in the UK has given its customers the option to request a second card for a friend or family member so that they can do their shopping for them.
One outcome of the Covid 19 pandemic may be increased collaborations between traditional banks and new Fintech companies offering technological solutions to banks. Such collaborations had been expected on foot of the Second Payment Services Directive (PSD2) which required banks to open up their application programme interfaces to third parties; however, for various reasons including use of old technology and systems, the number of collaborations to date has not been as high as expected.
Ireland as a Fintech hub
Ireland has a very strong Fintech industry and is home to a number of companies that provide software solutions designed to assist the financial services industry in the digital transformation. Enterprise Ireland recently announced that Ireland has come sixth in a global ranking of those responding best in terms of innovation to the pandemic.
The Central Bank of Ireland has observed that “fintech activity in Ireland is at its most intense in the payments sector. This is reflected in an increased number of authorised payment institutions and electronic money institutions in Ireland over the past 12 months or so, including Stripe, Coinbase (a cryptocurrency platform) and Soldo.”
The shift towards electronic payments in Ireland has been strengthened by companies choosing Ireland as their European hub. Businesses affected by the pandemic that did not previously have an online presence will require the services of such payment providers to facilitate the move to online purchases and this move, coupled with the move away from bricks and mortar premises, may be the push that banks and Fintech firms need to collaborate.
Digital financial services are increasingly necessary in our current cashless economy. Ireland is well placed for further Fintech growth and product development particularly in light of the decision of the UK to exit the European Union.
Irish Fintech companies continue to respond to the pandemic challenges with resourcefulness and creativity. We are well placed to assist with any regulatory concerns or queries. We have assisted a large number of Fintech companies to enter the Irish market and have extensively advised on their licencing and regulatory requirements. We routinely advise banks, payment service providers and electronic money institutions on their regulatory requirements.
If you would like to discuss any of the points highlighted, please contact a member of the Fintech team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.