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Despite a relatively small payments market, Ireland has been an important beneficiary of the UK’s withdrawal from the EU, as companies set up shop looking to use the destination to passport into the single market.
Last week, Ireland’s financial services minister, Seán Fleming, celebrated the record level of employment in international financial services firms in Ireland, speaking at the launch of Ireland for Finance Action Plan for 2022.
According to Fleming, there are more than 52,800 people working across the country in international financial services, a new record high for the sector in Ireland.
A lot of these people could end up working in Ireland’s burgeoning payments sector.
"There have been some companies who have shifted operations. A decent amount of talent has moved as well,” noted Sumit Aggarwal, senior banking and payments manager at NTT Data Services. “People are obtaining Irish passports to be able to operate across both the EU and the UK, and some who I know that are based out of the UK are getting a better deal in Ireland.”
As of October 31, 2021, Ireland had more than 40 e-money and payment services firms authorised by the Central Bank of Ireland. This includes the likes of Western Union and Stripe, as well as large technology firms such as Facebook.
The Brexit bounce
"We had a Brexit bounce and a number of UK fintechs have opened up in Dublin,” said Rónán Gallagher, head of omnichannel products at Trust Payments.
"This has meant a marked increase in the number of firms operating in the Irish market,” he pointed out. “As Ireland is quite a small market population-wise, we've served as more of a launchpad, so that firms are able to passport elsewhere in the EU."
"The biggest change in the last three years or so would be a significant increase in the number of regulated payment and electronic money service providers in Ireland,” said Russell Burke, senior consultant at Juristic.
The main drivers are Brexit as UK firms look for an EU base from which to offer PSD2 enabling open banking services, the internet giants being here already, as well as state agencies helping firms to locate in Ireland, according to Burke. “We've seen the number of payments and electronic money institutions rapidly increase since 2018, and this is likely to double again in the next few years."
"PSD2 and open banking has created a whole lot of new use cases, but Brexit is still probably the biggest factor in the rise in numbers,” he argued. “The Brexit deadline has passed but there are still a lot of firms coming from other locations who are looking to provide EU consumers with payment services, and while they previously might have gone to the City of London, they are now choosing Dublin."
This has, in many ways, made Ireland a victim of its own success, he quipped. “Brexit and the pandemic are generally both regarded as being bad for the economy overall, but ironically have had a positive impact on the payments sector in Ireland with Brexit having driven firms to Ireland and COVID-19 concerns pushing consumers away from using cash in stores and towards online shopping and digital payments.”
COVID-19 triggered a seismic shift in consumer behaviour more generally, he said, echoing many other countries around the world.
“Much like the UK, we had a high use of cheques and cash, but advancing technology, joining SEPA and more competition to the traditional banks has helped move us into the modern world,” he said.
Vive La Revolut!
Burke noted the likes of Revolut as an example of how things have changed. In fact, it was only recently that Revolut made moves to increase its offering to Irish consumers.
The money app is set to start offering traditional banking products, including credit cards and personal loans, to Irish customers this year after being granted a full European banking licence by the European Central Bank.
Revolut, which has 1.7m customers in Ireland, announced that it has opened a waiting list for customers who want to obtain a personal loan account.
“‘Revolut’ has become a verb here, and it's an easier way to do P2P. “I’ll Revolut you that €20”. It was initially taken up for its currency services by people who were travelling internationally but has since become very mainstream,” said Burke.
The pandemic provided a watershed moment as people had to come to terms with working from home, he pointed out. “Now, people are using Revolut for leaving dos and retirement parties instead of cash in an envelope. It is also making it easier for consumers to access cryptos, stock and other investments, and allows ordinary people to dabble in small amounts."
However, it is not just Revolut that has been a success story in Ireland.
“N26 have also gained a reasonable customer base here,” said Gallagher.
N26, the mobile bank headquartered in Germany, first launched in Ireland in December 2015 and now has more than 7m customers across Europe and the United States, with at least 200,000 of those in Ireland.
What is also flourishing are buy now, pay later (BNPL) products. "BNPL products are definitely taking off in the Irish market, and when you want to pay, you often now have BNPL services an option,” pointed out Aggarwal.
“One of the most noticeable fintech launches last year in Ireland was Klarna, which is a sign that BNPL is beginning to see an uptake in Ireland,” said Gallagher. "It arrived in November, and we are now seeing UK cross-border retailers enabling their BNPL payment options in the Irish market."
Yet, Ireland may also soon act to regulate the BNPL sector, he said. "There are lots of stories in other countries about debt that comes from using BNPL products. For example, there is evidence from jurisdictions like the UK that consumers may not understand what they are getting into.
“In Ireland, we have very painful, recent memories of the financial crash. This will spur regulators on to ensure that things remain stable."
