Ahead of UK FinTech Week 2020 webinar, taking place this Thursday, Alex Lee, Director at FInTechNI, shares his thoughts on the impact of the Covid-19 Pandemic on Northern Ireland’s FinTech Sector.
Register for the webinar here: https://www.innovatefinance.com/events/looking-to-the-future-of-fintech-in-northern-ireland/
By now it is clear that the Covid-19 crisis will have a very significant impact on the global economy, long after the pandemic is over. Despite being born out of the last crisis in 2008, the FinTech industry will not be immune from this one.
FinTech Sector not Immune
Nationally, the crisis has placed huge short-term pressure on cashflow and funding for most FinTech firms, and many have been focussed on protecting their staff, protecting their revenue and reducing their costs.
Some sectors in FinTech have been particularly hard hit – such as Peer-to-Peer Lending, Retail Investments and SME Lending. However, as most FinTech’s are purely digital businesses, they have been able to adapt very quickly to the lock-down restrictions and continue to offer a vital business-as-usual service to their customers.
It has also been heartening to see the emergence of the #FinTech4Good movement, with many FinTechs developing new services to help consumers manage their finances in these challenging times. Others are also making premium services available for free.
Northern Ireland FinTech Terrain
Earlier this week, we launched the Northern Ireland FinTech map, a visual representation of the mix of different players who are significantly involved in the local FinTech ecosystem.
In contrast with cities like London and Dublin, and reflecting our smaller financial services sector, Northern Ireland has fewer ‘pureplay’ FinTech firms.
However, we do have a large number of technology firms servicing the financial services sector, alongside other sectors, with particular strength in areas such as RegTech, Artificial Intelligence and Cyber-Security. Many of these clusters are linked to centres of excellence created by our leading local universities.
Along with these deep technology clusters, our extensive network of digital hubs, and superb access to start-up funding and skills, have all earned Northern Ireland a place in the top three FinTech locations of the future globally according to a Financial Times FDI Markets 2019 report.
So, I would say that whilst we don’t have a particularly broad coverage of the entire FinTech industry here in Northern Ireland, we do have some very deep technology clusters with world class expertise.
Challenges Facing the Industry
As is the case in almost all sectors right now, the greatest challenge facing Northern Ireland’s FinTech industry is one of liquidity and access to finance. In preparation for continued disruption, many are tightening their belts to ensure they have sufficient finances to get through the pandemic and resulting downturn that’s expected to emerge in its wake.
When it comes to accessing Government schemes and grants, the feedback we’ve had from local FinTechs is that Invest Northern Ireland has played a crucial role. Until last week’s announcement on the Future Fund and R&D Grant Scheme, start-ups were unable to avail of many of the previous measures, particularly the CBILs Loan scheme, as many of them are pre-revenue. As such InvestNI was, by and large, the only body providing financial support locally. This has been through ensuring better awareness and take up of existing grant schemes plus the introduction of a £10k grant for small firms.
Greater Access to Funding
We very much welcome last week’s announcement of the Future Fund and hope many of our local FinTech firms will avail of it, particularly as there is a strong track record of private investors co-investing alongside government here in Northern Ireland.
We would, however, welcome some further tweaks to the Future Fund scheme to ensure that Private Investors can avail of SEIS/EIS tax relief. Speaking as an angel investor myself, I know is a big driver of their participation in FinTech funding here in Northern Ireland.
Reasons to be Optimistic
Despite the economic hardship we will undoubtedly face for some time to come, if you’re a FinTech or a Tech company in Northern Ireland targeting the Financial Services sector, there is good reason to be optimistic.
It is worth remembering that FinTech was born out the last crisis in 2008, and there is already evidence to suggest this crisis will further accelerate the shift to digital and online-only models in financial services.
With more staff working remotely and sharing sensitive data more widely; more payments and transactions now taking place online; and our regulator maintaining a stringent supervisory focus; technologies such as RegTech, Cyber Security, Artificial Intelligence and Data Management are more critical now than ever before.
With world class expertise in these fields, Northern Ireland FinTech’s are likely to see much greater demand for their solutions to address these challenges now and well into the future.
Alex Lee is a Director at FinTechNI, a not-for-profit industry association set-up to support and promote FinTech in Northern Ireland which is part of the UK FinTech National Network who are organising FinTech Week. He is also Non-Executive Chairman at fscom, a Belfast based boutique regulatory advisory firm working with some of the leading FinTech firms in the UK and Ireland.
