The strategic alliance between ICT and financial services, long practised through a dematerialization process started years ago, is expressed today through the emergence of the FinTech sector. Do the newcommers born from this encounter represent a threat to the financial industry or a refreshing break likely to boost activities? Hugues Delcourt, CEO of BIL Group, explains how Luxembourg’s oldest bank chose to look to the future rather than regret the past.
What is your definition of FinTech?
FinTech is where technology meets financial services, with a disruptive twist. It involves a wide variety of industries – from P2P lending, robo- investing, payments and crowd funding to digital currencies and big-data – all in the service of financial companies. All these companies share a common trait in that they aim to make financial services and markets more efficient, while offering a better user experience.
Where does Luxembourg have a role to play in the development of FinTech?
Luxembourg has a lot to offer. BIL, as a major institution in the country, has the duty to support the many efforts to make it a more attractive place for this sector to do business. This will have a positive impact on the national economy. All of the relevant actors are working together, much as we did in the 80s and 90s to attract the fund industry to Luxembourg.
This country has the potential to become the European HQ of mature foreign FinTechs because of several advantages. It can offer the European passporting of regulated companies, by setting up an appropriate regulatory framework.
It offers a state-of-the-art IT infrastructure that provides top-quality connectivity and managed or cloud services. Luxembourg also offers recognised know-how in financial engineering, which is needed by some FinTech activities, like specialised vehicles, securitisation for instance. Most of all, it offers a business-friendly environment that allows innovative companies to thrive. Of course, there are also challenges ahead: access to funding, especially start-up funding, has not yet been resolved. But even more fundamentally, Luxembourg needs to offer a human resources pool that offers the kind of tech profiles this sector needs.
« AN OPEN APPROACH TO INNOVATION »
Are Luxemburgish customers ready to switch to FinTech services?
With 75% of the population now using smartphones, Luxembourgers are amongst the most intensive mobile users in Europe. This is combined with a state-of-the- art IT infrastructure and a strong local expertise in providing financial services. All together, this makes Luxembourg a very attractive place for FinTech operators.
What one must keep in mind, however, is that for “pure players” – a company that focusses on a single product or service in order to obtain a large market share – Luxembourg falls a bit short of the critical mass usually required for tech investments targeting only the domestic market to be able to break even.
We can observe that our mobile banking usage statistics demonstrate that our clients are willing to embrace technology whenever it offers them a clear added- value. But since an alternative offer barely exists at this point, it’s hard to say more than this.
Would you rather develop your own FinTech services or work with startups?
Our approach will involve doing some of both, by following an open approach to innovation. We have developed our own know how in mobile banking application development, «Quick Banking». We are the first bank in Luxembourg to offer instant access to the main features of its banking app without the use of a token and to make possible Touch-ID authentication for users of Apple devices.
We are looking forward to engaging with FinTech companies as part as our open approach to innovation. We wish to have a mutually beneficial exchange between them and our teams, not only on technological aspects, but also about business models, entrepreneurial and innovation culture.
We are aware that we can’t turn a supertanker into a speedboat within a matter of weeks. Working with start-ups is an opportunity to benefit from their innovative approach and technology, and offer a best time-to-market to deliver innovative products to our clients.
FinTech mostly helps to save time. Can it help to save money?
Fintech-derived products and services can save both time and money.
For a bank, for example, value propositions from FinTech firms such as Ripple mean being both more time and cost efficient in bank-to-bank money transfers. Integrating existing offers from FinTech firms makes it possible to offer such a service for a fraction of the development price or time we would have had to invest on our own.
For end-users, FinTech-based real-time settlement offers represent a relevant alternative to traditional cross-border money-transfer solutions, for a fraction of the cost. To give another example, Exchange-traded fund based robo-investment approaches offer a relevant value-proposition compared to traditional broker fees.
Innovative solutions like the new mobile banking app from Moven leverage real-time contextual insights to encourage savings, discourage impulse purchases and empower customers. Also, simple. com’s personal financial management provides users with relevant insights to better understand and master their spending habits.