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Helping Malta achieve its full tech potential

Helping Malta Achieve its Full Tech Potential

From the leading iGaming hub in Europe to 'The Blockchain Island', it seems as if there's no limit to how far Malta can go in the digital sphere.

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Helping Malta achieve its full tech potential

Matthew Scerri, Senior Manager, KPMG Software, and Mark O'Sullivan, Advisor, Gaming, were interviewed on the Blockchain Island Magazine to outline how Malta has achieved this level of success in these fields, its way forward, and how KPMG can be instrumental in making it happen.

Malta has been making a name for itself as a reputable digital hub ever since the early 2000s, when the first laws governing the iGaming  industry were passed. Successive administrations have carried on placing importance on nurturing and creating a fertile space in Malta for new digital sectors, most notably, in recent years, with the introduction of DLT regulation, which serves to lay down the law in the unchartered blockchain sphere - earning it its now famous title. Matthew Scerri and Mark O'Sullivan mapped out what's next for Malta's ever-growing digital sector, and KPMG Malta's role in its continuous expansion. 

The Blockchain Island - How Malta's Regulation Made it Stand out from the Crowd

While regulation was initially seen to be standing in direct opposition to what blockchain hoped to achieve, Mr Scerri says that people who adopted this view were missing the bigger picture. "The major hurdle blockchain and cryptocurrencies have to overcome is specifically mass adoption, as they would otherwise remain firmly confined within the domain of the tech-savvy. Things get even more critical when smart contracts are considered, particularly considering that these can have autonomous control and can take critical decisions, often being financial in nature. A question often posed by people who do not deal directly with code is 'how can we trust code to take the right critical decisions?"'

Mr Scerri says that regulation can give the stakeholders within an economy the necessary confidence to adapt such technologies to their day-to-day business and adopt them fully for their needs, which is what will ultimately bring this technology to the mainstream. "This is exactly where Malta's regulatory framework stands out, as more than just regulating  the financial element, it also regulates the technological aspect through the Malta Digital Innovation Authority (MDIA). Regulation gives added certainty and, above all, a set of rules which define a professional approach to a nascent industry." 

While the fact that Malta has taken such bold first steps makes it a pioneer, it inherently brings about risks of being the first to face certain challenges. "After setting the platform and attracting a lot of interest, Malta must now consolidate its position by delivering what it promised, and things are very much going on the right track," remarks Mr O'Sullivan. "Additionally, it is important to keep on building the knowledge in the industry and involving all stakeholders in decisions, as has already been done, as this is a fast and constantly changing space. Given this is a first of its kind, we also need to accept, and embrace, that the legislative infrastructure will need to be tweaked as the industry grows and opportunities emerge." 

The Esports Revolution - Is it the Next Big Thing?

Esports is often considered to be one of the next frontiers in the digital economy sector, even though Mr Scerri says the very meaning of the term is debatable. "Personally, I see it as competitive peer-to-peer digital gaming. This is based on a comparison to its counterpart, traditional sports. However, for the purpose of this article, I will keep in line with the popular understanding of Esports, namely professional digital gaming." 

He says that Malta's recent economic growth has primarily been driven by its digital companies, adding that significant investment in the Esports industry seems to be a natural extension to its already bustling digital games industry and iGaming ecosystem. "The Esports and digital games industries are expected to surpass $150 billion (€134.5 billion) in industry revenues in 2019. Malta has managed to establish itself as a hub for large digital events in Europe, attracting thousands of business leaders from across the globe to each of the events on this little island. The Malta Government can certainly replicate this model with Esports enthusiasts and business minds to propel the country forward in the Esports industry." 

Indeed, Mr O'Sullivan expands on the fact that a number of well-known digital gaming companies already have headquarters in Malta, including 4A Games, the company behind the popular apocalypse series, Metro, as well as Exient, which developed some titles in the Angry Birds and Lemmings series. "Additionally, bringing things back to Esports events, there are some highly respected indigenous companies who have organised some high-calibre events for a number of years to date. First up there is GMR Entertainment (or gamers.com.mt), who run the yearly Malta Esports Festival, attracting over 350 players, 1,000 spectators at the event and over 1.5 million views through online channels during 2018's festival. Next up, there is Quickfire, whose most notable event was the Supernova CS:GO Malta held in 2018. This event offered the largest prize pool ever seen in Malta, €150,000. The prize was scooped up by the number one ranked Esports team in the world, Team Liquid. Then there is also interest among operators within the iGaming sphere, who provide a platform for punters to place bets on their favourite Esports teams in similar fashion to a regular sportsbook outfit. Pinnacle and Betway are often considered to be two of the market leaders on this front.”

To strengthen its appeal to prospective Esports companies, Mr O’Sullivan says Malta has made significant strides forward. “Malta Enterprise offers excellent funding options, whilst GamingMalta is constantly driving the conversation forward alongside its Government counterparts, particularly with the forward-thinking Parliamentary Secretary Silvio Schembri. Just recently, GamingMalta led an Esports delegation to South Korea to further Malta’s understanding of the Esports and video games industries globally. Whilst Malta’s Esports industry is somewhat in its infancy when you look at that of many Asian countries, it is fair to say that Malta has a lot to offer this growing industry. 300 days of sunshine, an attractive tax structure, an English-speaking workforce and strong local-based tech talent are just some of them.”

Mr Scerri adds that given the relative infancy of the Esports industry compared to traditional industries, there is currently little room in Malta for industry competition at this point. “It is important that Malta’s locally-based Esports companies form strategic alliances for the ultimate good of the industry in Malta as a whole. For Esports companies looking to base their operations in Malta, it is equally important that similar partnerships are made and that they immerse themselves in the tight-knit Esports industry on the island. Additionally, it is crucial that the correct advice is sought from knowledgeable professionals. Malta has a lot to offer foreign companies and it offers incentives to attract companies to the island. Without the correct structuring and advice, it is possible that companies will miss out on good opportunities.” 

“Through its global network and locally-based experts, KPMG can provide a 360-degree service for Esports companies. From start-up phase to eventual global expansion, KPMG can provide expert insight and advise every step along the way. Globally, KPMG has been involved in both the video games and Esports industries for a number of years, and has built a strong knowledge base and excellent connections.”

Problem-solving Through Education and Tech

Among Malta’s greatest challenges when it comes to fulfilling its potential as a fully-fledged tech island are a lack of human resources and a need to invest further in education and R&D. However, it’s clear that the relationship between the two is symbiotic, and tackling the latter could positively affect the former. 

“You can never have enough investment in R&D and education as that is the starting point for new technologies, so they very much go hand in hand,” explains Mr Scerri. “There are various emerging technologies that are disrupting various industries and solving interesting problems – from Robotic Process Automation (RPA) bots freeing up time dedicated to repetitive tasks, to the Internet of Things, a world where it is not just people that are connected to one another, but devices too.”

“Technology is often touted as something that will replace jobs, but in reality, we are facing talent shortage across the board. I would argue that this is not necessarily a problem that is limited  to Malta, but Malta experiences its effects a bit sooner and in a more obvious manner due to its limited size,” adds Mr O’Sullivan. “I firmly believe that technology is actually the most efficient way of solving this.” 

Mr O’Sullivan and Mr Scerri concur that these are not changes that will happen overnight, so education needs to start from a young age, and have a broad scope. “It is encouraging to see  the new Centre for DLT being launched at the University of Malta to help bring the different roles within the space under one academic roof, for example. However, it must also be tailored to cater for people with different backgrounds and possibly from different generations – a one-size-fits-all solution rarely works in tech,” Mr Scerri said. “The perspective of a software developer and a lawyer has often been different, yet technology is seeing these two roles come closer than ever before.”

Mr O’Sullivan continues that education must be used to eliminate the fear and doubts of the unknown by providing the necessary information for people to be able to at least ask the right questions. “Once that happens, the technology starts to get demystified and adoption will quickly follow.”

Recognising and Harnessing Emerging Technologies

KPMG in Malta has long recognised the importance of emerging technologies, and is involved in a number of initiatives in this regard. Investments range from the aspect of educating different businesses, roles, stakeholders and the public through the KPMG Learning Academy, up to developing bespoke solutions through KPMG software, providing advisory services through its dedicated IT Advisory team, and finally providing ERP solutions through KPMG Crimsonwing.

“When looking at traditional service offerings which are relevant to this space such as audit, regulatory and tax offerings, clients expect you to have in-depth knowledge of the technology to be able to help them identify opportunities and cater for specific needs,” says Mr Scerri. “This is where the investment in specialised technologists comes into play, as it allows for a cross-functional team from different backgrounds to contribute to the delivery of these services.” 

KPMG is also using such emerging technologies to improve efficiencies in-house, which ultimately allows the firm to be able to offer a better experience to its clients. “We practice what we preach,” Mr Scerri grins.

With several businesses relocating to Malta to take advantage of the regulatory framework,  some of which have a presence  in multiple jurisdictions, KPMG Malta’s membership within a wider international network allows the company to reach out to people who have expertise in a number of different areas and their own specific jurisdiction, which will ultimately allow it to provide services of the highest quality. “In addition, due to Malta’s unique service offering, it also allows us to reach out to the same network to be able to attract business to Malta, by showcasing what the island is offering and how it sets itself apart from other jurisdictions,” Mr O’Sullivan concludes. 

© 2019 KPMG, a Malta civil partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity.  Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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