By Prof Noel O’Connor
What’s the difference between a traditional finance company and a FinTech? History and geography for a start – traditional banks and investment companies have been around a while and have spread roots in terms of real estate, personnel and, critically, customers. FinTechs are the (relatively) new kids on the block – cloud-based, nimble and often looking to take customers from their legacy competitors.
Traditional banks, insurers and investment firms are, in many cases, constrained by legacy infrastructure that limits their ability to connect systems, offer new services or improve customer experience.
Meanwhile, FinTechs offer a range of mobile financial services that are quick, 24-hour and easily updated. According to Statista, the number of FinTech companies in the EMEA region increased by nearly 200 per cent between 2018 and 2021. McKinsey research shows that the use of mobile banking grew by 20-50% during the first few months of COVID-19.
How are traditional banks, insurance and investment companies reacting to these rapid changes in customer expectations? Some are scrambling in-house or in conjunction with consultants to develop more user-friendly digital processes to their existing customer base. Some are working with start-up FinTechs to help them grow whilst incorporating their products. Some are just buying the upstarts outright.
There is another approach. Sprinkling AI ‘magic’ on a traditional financial services company can come in the shape of a partnership between companies and research institutions. After all, many FinTech entrepreneurs first germinate their ideas in universities and research centres. Ireland is a FinTech seed bed. Enterprise Ireland currently supports 255 Irish FinTech companies, with €658m in exports in 2020. A significant proportion of these FinTech ideas start within academia.
An increasing number of companies have been collaborating with the Insight SFI Centre, a university-based data analytics research federation. It’s an untraditional approach but it offers wide ranging competencies as companies can draw from the AI expertise of four partner universities. This kind of access to academic expertise is invaluable as many Insight industry partners have found. Many areas in FinTech have witnessed huge growth thanks to advances in AI technologies. AI needs to be fed with massive amounts of data, meaning that financial companies are ideally placed to avail of this new AI magic thanks to their treasure troves of valuable data.
Companies love the Irish ecosystem: all the financial services are here, all the tech companies are here and the research talent in AI is very competitive. While the intellectual property rights for tools developed as part of industry collaborations belong to the companies, there are mutual benefits, such as a patent application for companies and academic accolades for the research teams. Researchers in university labs are continuously learning from the process and feeding back into the graduate talent pipeline, ultimately leading to the potential of internship or employment opportunities. There’s a pleasing circularity at play that boosts our fintech start-ups and partnership development opportunities.
Ireland is now the eighth largest exporter of financial services in the world, and home grown R&D collaborations can both ensure that companies continue to lead whilst strengthening the relationship between Ireland and the global companies that work from here. The time is now and our RD&I engine is ready.