Top Five Things Fintech Companies Should Know Before Expanding to Europe
Fintech is one of the sectors that has remained resilient during the COVID-19 pandemic. In fact, some US fintech companies with European offices have continued to expand and grow their European footprint. Currently, there are 500 million people in the European Union in 27 different countries with border-free access to markets. Companies such as Square and Stripe decided early on to pursue their European customers by setting up offices in Ireland.
Your company may have overseas customers you need to service. And given the current anxiety over travel, having a base overseas to support those customers can help grow your business at home. However, care should be given to selecting the optimal European location for your overseas office.
Before your fintech company makes this crucial decision, here are five things to consider:
1. Find the Location with the Right Talent
Find a location where you can source people who have experience in running pan-European operations and have had success scaling them to sophisticated high-tech markets with high-end products and services.
On the talent front, Ireland has a young, well-educated population and no restrictions on providing the equivalent of green cards or H1B visas for foreign talent. Consider the recent activities of Mastercard, which first opened its EU office in Dublin in 2008. In February of this year, the company announced a major expansion, including the hiring of 1,500 people over three years, adding to its existing 650-plus employees.
2. Ensure Stability
Fintech companies need certainty and stability with regard to a location’s business and political environment, as well as the solidity of the country’s central bank. Ireland offers that as well as the benefit of it being a committed member of the European Union.
In July this year Ireland’s Minister for Finance, Paschal Donohoe, was elected President of the Eurogroup, a governing body that discusses matters relating to the Eurogroup currency. Ireland is also part of the EU’s €750 billion recovery package aimed at helping Europe to rebuild after the COVID-19 pandemic.
3. Understand the Regulatory Landscape
The Central Bank of Ireland is responsible for authorizing and supervising providers of regulated financial services in Ireland. One of the most significant roles the bank plays is as an EU passporting system for banks and financial services companies to enable firms that are authorized in any EU or EEA state to trade freely in any other state with minimal additional authorization. Countries that are not in the EU do not have these privileges. The UK’s decision to leave the European Union has resulted in 90-plus firms, including many financial services enterprises such as Bank of America and Stripe, locating regulated operations in Dublin.
4. Look for Innovation and Collaboration
Leveraging today’s explosion of digitization in fintech is seen in what some are calling the future of banking: electronic money Institutions (EMI). Teaming and collaborating with banks, EMIs are known for using state-of-the-art technology, enhanced security and deep knowledge to better support the tech-driven young companies that are emerging.
For example, New York-based digital payment platform leader Payoneer was recently authorized as an EMI by the Central Bank of Ireland. This will help Payoneer better serve European and global customers. EMIs are thriving in Europe, especially Ireland, which the Institute for Management Development 2019 rankings named as the seventh most competitive country in the world and second most competitive in the EU.
When it comes to collaboration, look for a country with a track record of supporting foreign companies locating there via R&D funding, government-funded training programs, attractive R&D tax credits and other activities crucial to success. One particularly potent source of help for U.S. fintech firms launching a European office is the “cluster” concept, whereby companies, government organizations and universities collaborate to focus their energies on specific technology areas. In the fintech arena in Ireland, these include AI, blockchain and cybersecurity.
As new technologies such as blockchain and cryptocurrency forge ahead, it’s essential to ensure your chosen European location is tech savvy and familiar with them. With Europe in mind, companies must examine key characteristics such as available tech talent, tax laws, business climate and overall costs of doing business while sorting through their options.
Over the last 40 years, Ireland has earned a highly successful track record for international financial services, and today hosts more than 450 financial services companies that together employ more than 44,000 people across a range of financial services sectors such as banking, asset management, fund servicing, insurance, aviation leasing, payments and fintech. Some of these companies include Wells Fargo, Paypal and MasterCard, along with a host of newer disruptors like Stripe, Remitly, Square and Coinbase.
The bottom line on selecting the best European fintech location should be balancing all the needs of your company — financial, technical, regulatory, etc. — and selecting the one that will help you weather the current situation while ensuring success in the future.
Originally published on the author’s blog and reprinted with permission.
About the Author:
David Gaskin is VP of International Financial Services & Fintech at IDA Ireland, where he assists West Coast companies to establish a presence in Ireland, to grow their European market base and support their international customers. For further information on how IDA Ireland can support international business expansion, download our Land and Expand Playbook, check out our High Growth Companies infographic, or visit idaireland.com.