Adaptability is key to success in rapidly evolving regtech space
Irish firms are not only keeping pace with international compliance trends, they're also helping define them, with companies such as Fenergo, Corlytics, AQMetrics, Daon and Know Your Customer having established world-leading positions in the demanding regtech space.
According to Brian Fahey of MyComplianceOffice (MCO), the foundation of this success can be traced back to the establishment of the International Financial Services Centre and the introduction of a 10 per cent corporate tax rate at the time. This was the nascence of an ecosystem that nurtured professionals to advance into senior roles and in some cases gain international experience.
Brian Fahey of MyComplianceOffice (MCO).
'Many have since returned, bringing valuable expertise with them,' says Fahey.
This international perspective is important. 'Ireland's relatively small domestic market necessitates looking outward for business opportunities, driving the development of global solutions. In contrast, regtech firms from larger economies – such as the United States – often focus solely on domestic regulatory solutions,' he adds. Ongoing investment by Enterprise Ireland and IDA Ireland has supported the sector to flourish with a global outlook.
While the Republic is home to many foreign direct investment companies in highly regulated industries, such as pharmaceuticals and food production, none of these sectors have fostered a regtech ecosystem on a par with financial services.
'The sheer number of financial firms operating in Ireland probably continues to shape and sustain Ireland's thriving ecosystem for regtech,' says Fahey.
'Globally, regtech solutions for banking and investment span numerous specialised segments, each addressing specific regulatory and enforcement challenges that have evolved over time. Each segment has its own set of competitors worldwide, and several Irish regtech firms are demonstrating leadership and innovation in these areas.' Fahey points to Corlytics as a pioneer in horizon scanning, leveraging artificial intelligence well before the advent of large language models.
'There are many other firms striving to be 'best of breed' solutions, which Irish firms often have to be as they are competing globally,' he says.
His own firm, MCO, is the largest Irish-owned regtech firm in Ireland, carving its niche with a single, enterprise-wide integrated platform for banking and investment firms.
'Traditionally, these firms have relied on multiple vendors for compliance solutions, but MCO consolidates these capabilities at scale. There is not another firm like us with the breadth of compliance offerings on an integrated platform,' says Fahey.
Ian Nelson, partner, head of financial services and regulatory, KPMG Ireland, agrees with Fahey's take that the success of Ireland's regtech sector directly parallels the development of the financial services sector, and it's becoming a symbiotic relationship.
Ian Nelson, partner, head of financial services and regulatory, KPMG Ireland.
'Those entities that are able to use regtech solutions to allow for a less time-intensive, less manual and, by extension, better regulatory outcomes, coupled with better customer experience, will be at the forefront of the winners in the sector,' he says.
Nelson says that by their nature, a number of regulatory solutions are very quickly scalable from a localised to an international environment, and Irish regtech firms have become very quick to evolve in that context.
'For example, regtech firms that offer solutions in relation to anti-money laundering (AML) requirements, that have been tailored for an Irish regulatory regime, can be quickly scaled to an international set of requirements where the technology is in place, and it is about a simple evolution of the rules within the technology.' Julie Kennedy, partner, financial services risk and regulation, PwC Ireland, says the financial services sector has undergone a profound digital transformation, reshaping the way products and services are delivered to customers. 'This shift has necessitated the revamping of both customer-facing platforms and back-office infrastructure,' she says.
Julie Kennedy, partner, financial services risk and regulation, PwC Ireland.
'The regtech industry is emerging as a powerhouse, bolstering firms in navigating a complex regulatory landscape with innovative solutions that not only streamline compliance but also enhance customer service and afford companies a strategic edge.' Looking at Ireland as an incubator for regtech innovation, she sees impressive innovation in niches including AML and counter-terrorism financing.
'Statistics reveal a surge in regtech start-ups in Ireland, with many gaining unicorn status,' says Kennedy.
In the face of increasing global regulatory complexity, adaptability and innovation are the keys to success.
'Irish regtech firms are adeptly navigating the tangled web of global regulatory requirements by crafting systems that are both scalable and adaptable,' says Kennedy. 'Amidst rising competition and evolving legislation, Irish firms are setting benchmarks with agile technologies that cater to both European and international demands. Industry leaders highlight the strategic importance of this adaptability, pointing to Ireland's prime position at the nexus of European finance.'
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