Compliance demand drives fintech and security consolidation in Irish tech

11 Apr 2018

Image: lchumpitaz/Shutterstock

Compliance demands are driving consolidation between fintech and IT security offerings, Bank of Ireland’s Adrian Mullett tells John Kennedy.

At 21pc, the security and fintech sectors accounted for the biggest portion of drawdowns by Bank of Ireland tech client companies in 2017.

Adrian Mullett, head of technology sector for the bank, believes it is no accident that they are grouped together because there is increasing convergence between the sectors.

‘Ireland has a strong cohort of companies active in security. But what you are seeing now are massive changes in regulation compliance, and this is where fintech and security work hand in hand’

“The key thing we’ve seen is a convergence in fintech with security. Increasingly, we are seeing more solutions combining fintech and security emerging,” he said.

A key motivating factor in the greater convergence between fintech and security is regulation.

Mullett cited Irish tech company Propylon, whose software enables legal firms and publishers to stay on top of changes to legislature. He explained that these capabilities combined with compliance are a game-changer.

“This is enabling Propylon, for example, to create significant value-add technology that helps legal firms and publishers to keep up to speed with changes to the underlying legislation.”

Irish tech sector set to grow 20pc in 2018

Indigenous tech sector in Ireland forecast to grow 20pc in 2018

Adrian Mullett, head of tech sector at Bank of Ireland. Image: Bank of Ireland

The indigenous Irish tech industry is forecast by Bank of Ireland to grow more than 20pc this year. The bank’s tech sector team said it expects revenues across indigenous Irish IT services and the digital sector to reach €3.5bn in 2018.

The robust forecast is also influenced by a 150pc increase in the level of debt funding to tech firms in software, telecoms and IT services compared with 2016. About one-third of debt funding was to support acquisitions and management buyouts and the remaining two-thirds went into funding working capital and expansion. Around 60pc of Bank of Ireland-funded companies were software firms with proprietary products, up from 50pc in 2016.

A key driver in the case of fintech and security is the General Data Protection Regulation (GDPR), which becomes law in May.

Mullet believes the demands GDPR will place on organisations to remain compliant will drive further consolidation in the market among fintech and data security companies.

“Ireland has a strong cohort of companies active in security. But what you are seeing now are massive changes in regulation compliance, and this is where fintech and security work hand in hand.

“The solutions being sought in the market aren’t bespoke engagements, but more like managed security services and partnerships. Companies are no longer buying technology just because they have to, but they want to be able to handle challenges on a rolling basis. They no longer want to buy security, compliance and fintech systems separately; organisations want to have these as a single suite of managed services that they can subscribe to.

“And what we are seeing is a lot of realignment and consolidation of services, products and offerings to meet that, and this is influencing financing decisions.”

Mullett said that this is a powerful position for companies to be in if they play their cards right.

“It will mean selling software as well as increasing contract sizes, but the trick is how you avoid commoditisation.

“We are seeing a move towards managed security providers consolidating their tech with fintech and regtech to meet compliance needs of various organisations. GDPR is merely a symptom of that as well as being a driver in and of itself.”

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years