A publication of the Luxembourg Bankers’ Association
Luxembourg Banking Quarterly
2015 03 Editorial
Innovation in financial Cover Story services
After dot.com, E-commerce, Cloud Computing, Big data, Internet of things, FinTech – beside Digital banking - is © ABBL © the new buzzword. Its rise is due to a ABBL © combination of disruptive technologies, Marc Hemmerling radical consumer behavior changes as (Member of the Management Board, ABBL) well as cultural and social evolutions. FinTech Mr Hemmerling, what does Why is FinTech important for the The most important and most visible technological development “FinTech” mean? ABBL? in recent years is the ever-growing broadband capacity enabling First of all, ‘FinTech’ is a word that is used quite often at The ABBL defends their members’ interests and support their mobile devices with their increasing processing power to become the moment; it’s a lot of hype. However, it has a meaning: development. Moreover, as already mentioned, FinTech could the personal assistant to an ever growing population all over the ‘FinTech’ is an abbreviation for financial technologies and raise a problem to banks, which is why the ABBL sees it as world. With the consequence that for the first time this year more a collective name for disruptive IC technologies used to their goal to inform their members on the topic of FinTech and people access the Internet via mobile devices than with desktop offer a large variety of financial services, such as payment to provide guidance and support. It is about the transforma- computers. More and more mobile solutions are launched and applications or ordering systems. ‘FinTech’ could therefore tion of the bank we know today so that it can survive tomor- enable customers to handle everyday life situations. Being able to be equated with innovation in financial services, for instance row. Bill Gates once said: ‘Banking is necessary. Banks are pay goods and services, to transfer and manage money anywhere offering more modern and user-friendly services through not.’ This statement is only true when considering the banks anytime are one of the most useful and popular applications on technologies. ‘FinTech’ is covering in our opinion too different that stick to traditional banking models without adjusting to mobile devices. topics: new products, services and business models. These new technologies and to the new market reality. new products are only possible through the use of disruptive From a cultural point of view an interesting diagnosis is that clients technologies, such as mobile phones, applications, Big do no longer solely rely on their banks anymore for payment, credit data and social networks. It is often said that FinTech is only or other financial services. Especially the younger generations turn What is the role of banks in applied by start-ups, which isn’t true because banks and to innovative service providers such as crowdfunding platforms FinTech? Are they involved in other traditional actors of the financial sector can make use or other digital financial services which meet their needs best. Research & Development? What of it as well. So it’s about new technologies that allow offering All these developments will not replace the traditional banking are the challenges for banks in new and better financial services. industry. If banks want to remain competitive vis-à-vis a fast growing this context? community of new types of financial service providers they have In Luxembourg, most banks are subsidiaries and thus not to rethink their business models and their organizational and much involved in Research & Development (R&D). Compared operational structures How do FinTech impact banks? to other banking institutions, such as ‘Deutsche Bank’ in There are two main things that one must consider: On the Frankfurt or ‘Société Générale’ in Paris, these small entities What is true for banks also is for financial centres.I f the Luxembourg one hand, banks have clients who are accustomed to using in Luxembourg often do not have the required people financial centre wants to remain competitive, the digital agenda has new technologies and who would like to use them in banking concerned with innovation and research. Indeed, banks to be the priority. The Luxembourg Government has understood the services too. On the other hand, there are lots of start-ups present in Luxembourg often belong to big groups and work importance of the development of a sustainable FinTech ecosystem showing up new ideas and ‘snatching’ the banks’ clients with their respective mother company, which implies that in Luxembourg. With the “Digital Lëtzebuerg” strategy it aims to who are not offered the required ‘tech-services’ from their they often do not have the permission to perform proper consolidate the positioning of the Grand-Duchy in the ICT world banks, which means that competition develops. This is R&D. We try to motivate banks to think about innovation (and and to create an high-tech excellence centre for FinTech, thus why FinTech strongly impacts banks, which must analyse research) in cooperation with the University of Luxembourg, developing the financial place and allowing its actors to expand in the risks, dangers, advantages and opportunities of the use Luxinnovation and LIST (Luxembourg Institute of Science this almost borderless global market for innovative financial services. of FinTech. And if a banks decides to embrace FinTech it and Technology). The challenges are quite simple to define: has to answer the question of how to proceed best? Alone Today, Luxembourg already is a major European E-money and if banks do not embrace the new technologies, they will miss or cooperate? Banks would need people qualified in both E-payments hub besides attracting virtual currencies actors. A important opportunities to offer new services demanded by finance and technology, often young ones as this is a whole cutting-edge IT infrastructure, highly-skilled professionals in financial the market, which implies the loss of clients. In this case they new business area. This is very difficult at the moment due to and IT services, responsive and sound business minded authorities, will lose market share; if a customer’s bank does not offer a a high demand for highly IT- and finance skilled employees. as well as the innovative, international character of the Luxembourg certain service while several others companies do, the client Furthermore, in the new FinTech era, technical solutions such financial centre make the country an ideal location for the will consider to purchase one of those new companies’ service. as mobile applications are rapidly out-of-date and must be development of successful FinTech in the EU single market. Besides Our aim is, in cooperation with the Government, Luxembourg upgraded regularly, what banks are not used to do with their these competitive advantages and due to its size, Luxembourg is for Finance (LFF) and Digital Lëtzebuerg amongst others, to current organizational set-up and existing legacy computing an ideal test-bed for innovative financial service solutions.U p to us make sure that Luxembourg remains an attractive, competitive systems. all to make it happen: fast and innovative… and modern banking centre in the world. Cover Story continuation
How does the ABBL support Why does FinTech come to or Luxinnovation, who support the development of FinTech start-ups and established companies. There are also some FinTech development in Luxembourg from the outside? private organisations, such as Silicon Luxembourg, that are Luxembourg? Why do FinTech startup their mainly trying to promote and advertise. We have internal working groups involved in FinTech business in Luxembourg? development. The ABBL already has so-called ‘Clusters’ and Luxembourg is a long-existing and business-friendly financial LFF, ICT Luxembourg, we plan to establish a ‘Digital Banking and FinTech innovation’ centre where necessary institutions, such as the CSSF and Digital Lëtzebuerg, … many cluster, which shows that this is a very important topic as the Central Bank, are already established and working the chairperson of each cluster is represented in the board organisations are involved in efficiently.O ne can say that there are other countries that are of directors of the ABBL. Working groups are subordinated FinTech. How does the ABBL rather opposed to the emergence of FinTech companies and to this cluster and have the mission to solve and answer are slow in taking these new technologies on board. We think cooperate with them? specific problems and questions related to FinTech, such as that, although one can stand up against fintech business, ABBL members are not provider of computer technologies the main activities, training and education in this sector etc. one cannot utterly ‘ban’ it. We must maintain and uphold or IT services, nor is the ABBL. However our members are The ABBL then brings these ideas to the attention of the this business-friendliness: ABBL, beside inciting its member by far the largest users of these technologies in Luxembourg. Government and gives recommendations and advice on what banks to make use of the new disruptive FinTechnologies, Therefore, the ABBL is a founding member of ICT Luxembourg they could or should enhance, such as supporting projects welcomes these new Fintech companies, as the ABBL is for instance in order to defend our interest and solve ‘FinTech- and education related to FinTech. Moreover, the ABBL does different compared to other banking associations in Europe, related’ problems. We participate in working groups after the same at European level in Brussels - at the European as not only banks, but also start-ups can become its having made our proper opinion about several issues and Commission, the European Parliament and at the European member. In addition, CSSF assists these start ups getting pass on our ideas to these organisations. financial sector organisations’ levels - in order to change laws their permission respectively license to do business in and to get support. This sector needs qualified people who Luxembourg. Once they get a license, they have the benefits are familiar with finance and technologies, that is why it is so of doing business in every member country of the European What is done at EU level to foster important to develop and to reform the current educational Union. Further financial state aids forR &D and contributions FinTech in Europe? system. like the project ‘seedfund’ also attract these companies. The EC’s ‘Digital Single Market’ policy is a major framework Can FinTech companies become allowing Europe to take benefits of the new ICT. At EU level Do we have any FinTech success there are many working groups that make observations, ABBL members? If yes, what are stories in Luxembourg? among other things, whether laws should be changed or not, the benefits for them becoming in order to facilitate the development of the FinTech sector. members of the ABBL? Digicash offering mobile payment services now knows some Apparently, financial support is allocated to some companies success, but there are more companies coming from outside as well, in order to support their projects. All this is currently Yes, if their activity is supervised by CSSF (Commission de the country, such as PayPal and Amazon Payment Europe, in the development phase. Surveillance du Secteur Financier) or linked to the provision of iTunes. Concerning FinTech, there are a lot of companies that financial services.T hey would have the possibility to exchange are currently trying to get their license, such as Ripple Labs, What does the bank of the future information with other members in the before-mentioned CoinPay or bitflyer. working groups. They can discuss related topics, such as look like? These are all companies that have chosen Luxembourg for strategic and technical problems, which makes it easier to Personally speaking, I think that the bank of the future looks developing their international business out of Luxembourg, further develop their business. What is more important, the like a car manufacturer: In the first place, a bank has its own as they consider Luxembourg as a true FinTechHub (refer to ABBL supports their members in defending their interest vis- idea of what products they want to offer (sports car or family previous question) with a high development potential. à-vis the CSSF, Central Bank, the Ministry of Finance and van?). Then it defines the particular products.O f course it has other entities. They have also the possibility to communicate domains where it is very competent in, and others it is not their interest to the European Banking Federation (EBF) and How do you consider the and needs advise or help from other companies that have the European Payments Council (EPC). development of FinTech in the the necessary qualifications. In cooperation or with the help last years in Luxembourg? What of partners such as start-ups, the bank, (whether they bought some of those partners or they change partners regularly are the main drivers and inhibitors conditioned by the product or service they want to sell) could supporting this development? develop and offer the best product/service possible. The customer only sees “his” bank, where behind is a more or less The development of FinTech in Luxembourg increases at a complex organization that produces the particular service or very fast pace, as we already count about 150 companies product. In other words, the one who buys a car also only involved in FinTech business.There are some initiatives, sees the final product and brand of his preferred manufacturer. such as PwC Accelerator, BGL lux future lab, Technoport EUROFI Financial Forum 2015
Echos from the EUROFI Financial Forum
The EUROFI Financial Forum 2015 “EU and Eurozone growth The following key points have been identified: and integration challenges: the moment of truth?” organised New emerging trends in the financial industry like in association with the Luxembourg EU Council Presidency digitalisation, or alternative sources of funding (e.g. peer to took place from 9 until 11 September 2015 in Luxembourg. peer lending, crowdfunding) are as much as challenges than The EUROFI Financial Forum aims to facilitate open and opportunities and the financial industries need to integrate interactive discussions between public decision-makers and such consumer demands. leaders of the financial industry on the major on-going reforms The proposal for an Action Plan for a Capital Market in the financial sector. Union will be published by the end of September. The prerequisite for such a Capital Market Union will be This year, the debates focused on EU priorities in the different national regulatory convergence in key aspects like sectors of financial regulation and initiatives for growth of the insolvency, or company law. financial industry in Europe. One main element of the Capital Market Union will be Many ABBL representatives followed the different high level the framework for simple, transparent and standardised debates on important topics such as: securitisation to be published also by the end of September. © ABBL © Growth and integration challenges in the EU; Such a framework needs to be well calibrated to be a success. From left to right: Emerging trends in the financial services sector; Frank Engel - Member of the European Parliament Implementing the CMU and asset management future Serge de Cillia - CEO of the ABBL prospects; Yves Maas - Chairman of the ABBL Antoine Kremer - Head of European Affairs, ABBL Ensuring the resilience of the EU financial sector. financial training for VSEs and SMEs
What type of financial training is required for VSEs and SMEs?
The Union Bancaire Francophone 1 (UBF) held its first workshop Luxembourg initiatives on financial training for SV Es (very small enterprises) and SMEs on 2 September 2015. “Apprendre à Entreprendre” (Learning to be entrepreneurial) is The educative role banks play is therefore essential. They the motto of the non-profit organisation Jonk Entrepreneuren transmit their basic financial knowledge to the entrepreneurs Ms Catherine Bourin, member of the Management Board of (JE), founded in 2005. Through its different programmes, JE with the help of their employees so that the latter can present the Luxembourg Bankers’ Association (ABBL), took part in gives young people aged between 9 and 30 years a taste of better developed projects. the round table discussion entitled “Measures implemented what business life entails. JE includes representatives from by UBF to promote financial training in VSEs and SMEs”. schools and the economic sector. Several of the ABBL’s The new FinTech niche markets are indeed the supporting member banks have entered into partnership with JE, thereby As a member of the UBF, ABBL’s involvement here once pillars which clearly exert a considerable influence on economic providing volunteers (bank employees) who have the role of again shows how it invests regularly in campaigns relating to growth. Entrepreneurs who wish to set up a business providing teaching classes with different modules dealing with financial companies’ social responsibility. Its commitment is reflected innovative services will clearly require the support of players training. in its organisation of and participation in various initiatives from the world of banking in order to succeed. related to financial training. Moreover, the Luxembourg Chamber of Commerce and the In order to deal with any difficulties the entrepreneurs face, Financial training is of crucial importance not only for the ABBL have joined forces to create the House of Training whether relating to access to financing, reimbursing their loans public at large, but also for entrepreneurs. Indeed, appropriate by merging the Luxembourg School of Commerce and the (which, in turn, give rise to problems of over-indebtedness), financial training has an undeniable influence on encouraging Institut de Formation Bancaire, Luxembourg (IFBL). The or to receiving support and coaching, the role of the banking innovation, the setting up of companies and, consequently, mission of this newly-created entity will in particular involve institutions here is undoubtedly a major one. Better financial on economic growth as well. providing support to companies in the development of their expertise will facilitate the preparation and realisation of employees’ expertise and skills. entrepreneurs’ projects and ensure their sustainability. The prescribed support for entrepreneurs is based on the following lines of action:
access to and use of financial services;
optimisation of their financial management;
assistance for the development of their activities.
As in other European countries, the large number of bankruptcies in Luxembourg essentially affects SMEs and VSEs. The explanatory factors that are most frequently cited relate to the lack of a viable business plan. It is therefore essential that entrepreneurs are able to finance their businesses themselves as far as possible. To do so, they need training in financial planning.
According to a study carried out by the European Commission in 2013 2, young people who have received entrepreneurial training are not only more likely to find employment, but are ABBL © also more prone to starting their own company.
It is therefore essential to make young people aware of the need to begin an entrepreneurial career as early as possible in order to acquire the necessary basic qualifications with which they can carry out their business.
The study also shows that entrepreneurial training is an excellent driver when it comes to supporting job growth and creation. © UBF
COSME (Competitiveness of Enterprises and Small and Medium-Sized Enterprises (SMEs))
SMEs are the backbone of Europe’s economy, providing 85% of all new jobs.
COSME is an EU programme running from 2014 to 2020 with a planned budget of €2.3bn. COSME will support SMEs in the following area:
Better access to finance The Entrepreneurship 2020 Access to markets Action Plan Supporting entrepreneurs by strengthening entrepreneurship education, mentoring, (The European Commission) guidance and other support services This Action Plan aims to facilitate the More favourable conditions for business creation and growth creation of new business and to provide a better support for existing businesses. With a focus on entrepreneurial education 1 A network of French-speaking banking associations set up on 4 March 2011 with the aim of developing a stable financial and training. sector for the economy by sharing experiences and holding thematic workshops within French-speaking circles. 2 Entrepreneurship Education at School in Europe, published in January 2015. IN SHORT financial training for VSEs and SMEs continuation 21/09/2015 23/09/2015
Financial Mission in China Yves Maas, Chairman of the ABBL made a presentation entitled SMEs in Luxembourg: Key Indicators “The State of Europe’s Economy” during the official financial mission in China. 87% of Luxembourg’s firms count less than 9 employees.
Number of employees by enterprise size Number of enterprises by sizes - Services sector
507
© LFF 43 337
17/09/2015
60 000
House of Training - Announcement of first CEO 50 000
40 000 Nico Binsfeld has been announced as the firstC EO of the House 600 30 000 500
of Training (HoT). The HoT is the new training entity established 20 000 58 344 400 by the Chamber of Commerce and the Luxembourg Bankers’ 10 000 300
Association. 200 100 24 739 0 0 107 25 1-9 10-19 82 101 20-49 50-249 +250
15/09/2015 32 243
The ABBL enlarges its Team 36 882 Annick Rollinger has joined the ABBL Secretariat since 15 September 2015.
01/08/2015
ABBL Membership: new member Bank of Communications (Luxembourg) S.A. Note: Small to Medium Sized Enterprises based in Luxembourg exported the most Source: Entrepreneurship at a glance 2015 - OECD 08/07/2015
Chairman’s Dinner According to the latest Global Entrepreneurship Monitor (published in 2014), the The ABBL held its annual Chairman’s Dinner on 8 July 2015 in the most significant constraint in Luxembourg is the low level of entrepreneurial presence of the Minister of Finance, Mr Pierre Gramegna. education at primary and secondary school.
Established Business Ownership: 3.7% Perceived Opportunities: 43% Perceived Capabilities: 38% Entrepreneurial Intention: 12% Fear of Failure: 42% Source: Global Entrepreneurship Monitor, 2014 © ABBL ©
SMEs in Luxembourg: Tools and information
House of Training: http:www.houseoftraining.lu
Jonk Entrepreneuren, Luxembourg: http://jonk-entrepreneuren.lu
Businesscheck: https://www.businesscheck.lu/ Initiated by the “Haut comité pour le soutien des PME et de l’entrepreneuriat”
© ABBL © (created in June 2014)
Business Mentoring: http://www.businessmentoring.lu/fr
01/06/2015 ASTF - New address Editor The ASTF has moved ! The new address is: ABBL Communication Department 15-17, avenue Gaston Diderich L-1420 Luxembourg This publication may not be reproduced, ABBL | 12, rue Erasme Follow the ABBL on: either in full or in part, without the prior P.O. Box 13, L-2010 Luxembourg permission of the ABBL. Tel.: (+352) 46 36 60-1 | Fax: (+352) 46 09 21 Thank you for contacting us: [email protected] | www.abbl.lu [email protected]