IDA Ireland: land of opportunity - David Gaskin
Ireland, once dubbed the 'Celtic Tiger' for the strength of its prospects for economic growth, suffered greatly in the downturn following the financial crisis, but now seems to be well on the road to recovery. The efforts of IDA Ireland will be crucial to building a sustainable, long-term recovery, so Future Banking spoke to David Gaskin, manager of global banking and payments, about the role financial services will play.
Ireland's prospects for economic growth are stabilising and there are many positive indications of a steady growth trend taking hold, even though the economy was hit hard in the aftermath of the global financial crisis. The success of the government's efforts to encourage inward investment will be crucial to building a solid platform for growth, and the Industrial Development Agency, better known as IDA Ireland, will play a big part as it focuses on securing foreign direct investment.
IDA Ireland currently has 1,050 companies in its portfolio and 220 are international financial services businesses. This shows that the financial services sector is a key area into which Ireland is hoping to draw more investment, and it can do so by building on a strong track record in the industry. The international financial services industry in Ireland consists of companies such as Bank of America Merrill Lynch, Barclays, BNP Paribas, BlackRock, Credit Suisse, Deutsche Bank, HSBC, JP Morgan, Morgan Stanley, State Street, Sun Life, Sumitomo, UBS, Unum and Wells Fargo.
"We really started marketing Ireland to the financial services community with the establishment of Dublin's International Financial Services Centre (IFSC) in 1987 and the industry has responded by locating many different activities here," says David Gaskin, manager of the global banking and payments team at IDA Ireland. "Citi, for example, now employs more than 2,500 people here. Ireland is attractive to such institutions because they can secure talented staff at reasonable cost in a mature, highly productive and dynamic environment.
"Financial services companies in Ireland perform a diverse range of international activities across front, middle and back-office business lines, such as corporate and investment banking, treasury and cash management, global transaction services, fund servicing, and customer and technical support.
"There are many encouraging signs for Ireland's economy, and financial services companies will play an important part in accelerating that growth in the future," he adds.
GDP growth in Ireland is expected to be around 0.3%, but the Department of Finance predicts better performance in the coming year, expecting 1.8% growth in 2014. Exports of services, notably in the IT sector, continue to grow and there are positive signs in the labour market as unemployment continues to fall. Such trends suggest that the international financial services industry will find a stable home in Ireland.
A strong pedigree in financial services
IDA Ireland's financial services division has four key business units, with teams focusing on areas such as investment management and insurance, but Gaskin expects that the sector he leads - global banking and payments - will also attract great interest from international financial institutions.
In February 2012, global online payments company PayPal announced the opening of a European operations centre
and the creation of 1,000 new jobs over a four-year period. Ireland is home to their customer service, risk prevention, financial operations, merchant services and sales functions across the EMEA region.
The Irish Government, acting through IDA Ireland, supported the venture, just as it did the launch in Dublin of an investment fund services operation by post-trade services provider Clearstream, which is owned by Deutsche Börse. The new operation was announced in November 2012 and offered the potential to create more than 100 new jobs over time, principally handling processes for the company's Vestima investment fund platform.
Bank of America is another key name in Ireland's financial services sector, having established operations for its MBNA credit card business and Banc of America Leasing Ireland. Similarly, Citi has a long-standing presence, having been the first international financial institution to receive RD&I financial assistance from the Irish Government. It now has extensive operations in Ireland that support its transactions services business.
"Citi, Bank of America and Barclays have been here since the 1960s and '70s, which shows that long-term investments are being made," remarks Gaskin. "Many financial institutions that have been here for a long time have grown their operations significantly over the years.
'The typical activities of international banks in Ireland include corporate banking, lending, capital markets, leasing/asset financing, bond issuance, private wealth management, fund servicing and insurance. Many of the services are delivered from Ireland on a pan-European, EMEA or global basis as part of a follow-the-sun strategy or integrated global delivery model. Investors have successfully structured their operations in Ireland to act as cost centres, cost-plus or profit centres, depending on their strategic and operational requirements."
One company that has recently decided to grow its operations in Ireland is Deutsche Bank, which was already a key client of IDA Ireland's financial services division. The bank has decided to create a regional hub and centre of excellence in Dublin, creating 700 new jobs.
As well as the growing population of financial institutions setting up new businesses or expanding existing operations in Ireland, it is also worth noting the range of activities performed. Ireland has a strong track record for business process outsourcing (BPO) and customer relationship management (CRM), as well as a capacity for innovation in technology-related services or research and development.
"The focus of BPO is moving away from low-cost services and towards improving the quality of services; Ireland is a great place to help organisations do just that, whether they are choosing a partnership approach or working directly with vendors," says Gaskin. "That choice depends on the circumstances of the bank, but, either way, there are opportunities to reduce costs and improve quality.
Ireland has developed a strong cluster of payment companies over the last decade. "The payments industry has seen a significant shift in recent years and is currently in high growth mode," says Gaskin. IDA Ireland has seen some major investments recently from companies such as MasterCard, PayPal, First Data, Western Union, Vesta, YapStone and many more. Ireland has proven to be a successful location for a wide range of payment company activities including customer service and technology development.
"Ireland has the talent so there are many organisations, like Bank of America and PayPal, that have customer service centres within the business centres that exist in Ireland," continues Gaskin. "Ireland is a young nation, which means it has a young talent pool that shows great levels of productivity. We have a competitive rate of corporation tax at 12.5%, as well as good technology resources and a strong track record."
A bright future
As well as the competitive rate of corporation tax and the positive economic prospects that are building, Ireland offers many advantages for international businesses wanting to set up new operations. IDA Ireland is keen to ensure that these advantages do not go unnoticed.
"IDA Ireland provides a range of services and incentives, including funding and grants, to companies that embark on FDI initiatives in Ireland," says Gaskin. "In addition to financial incentives, we provide nonfinancial support, which includes helping global financial groups to explore the appropriate global operating models and identify suitable activities (front, middle or back office) that can be successfully performed in Ireland as part of such models.
"We facilitate investment in many ways," explains Gaskin. "We provide information on the country's capability in various sectors, and we can arrange itineraries for clients to showcase the benefits of investing in Ireland. We can arrange meetings with people from the central bank if necessary.
"Another key factor is that it is very easy to set up a company here. Ireland has a small, highly globalised economy, and it is the only English-speaking country in the eurozone. It has consistently been recognised as an easy place to do business, and it takes only five working days to set up a limited company here. That means that companies can move quickly once the decision to invest has been made."
Gaskin is positive about the future of financial services in Ireland and sees innovation as a key area of investment in the years ahead.
"There is a strong track record of financial institutions setting up core business operations here, but there are other elements that we can emphasise, such as innovation," he says. "Some financial services companies have set up R&D centres here; Citi, for example, is developing part of its next-generation e-banking platform from Ireland, and Aon is developing its global risk insight platform from its offices in Dublin.
"There are regional servicing hubs for processes like clearing and settlement, shared services, operations and much more," he continues. "There are big opportunities for growth in areas like software development too."
For financial institutions looking to explore new avenues of expansion, IDA Ireland is always on hand to help.
"We are here to add value and find solutions for our customers in the financial services sector, whether it is in a regulated front-office trading business or an unregulated space like CRM," says Gaskin. "Whether it is in insurance, asset management or banking, Ireland is a land of opportunity."