Finance & FinTech innovation 2025 by The Banking Scene and EBRC by EBRC

FINANCE FINTECH INNOVATION 2025 HYBRIDIZATION DESIGNS THE FUTURE OF THE FINANCE INDUSTRY

FINANCE & FINTECH INNOVATION 2025 HYBRIDIZATION DESIGNS THE FUTURE OF THE FINANCE INDUSTRY

Introduction

COVID-19 impact on FinTech

•

COVID-19 disconnected FinTech companies

•

COVID-19 connected FinTech companies

The future of Finance is embedded

•

From branches to the single Internet village

•

Emerging Finance hybridization

•

FinTechs, catalysts of Finance transformation

•

Next FinTech hotspots

•

The RegTech opportunity

•

To speed up payments

•

Developing new services with Artificial Intelligence

•

A greener, more tokenised world

Successfully hybridizing your business

•

Building Trust

•

People skills

•

Agility by design

Conclusion

INTRODUCTION

INTRO D U C TION

hether we look at society, people or businesses, we were never more connected than today. Digital transformation reached new heights in 2020-2021, not so much because of technological advancements but as result of change driven by a behavioural and cultural shift ignited by COVID-19. COVID-19 has disconnected people physically but humanity has found solutions against solitude through digital innovations. This new type of digital relationship is no different for financial services and the way banks interact with their clients, moving now towards a full set of digitalised solutions.

Some of these FinTech companies service traditional financial players directly, helping them to become more digital, while others sell directly to the end-customer, whether that is a consumer or a business. Most FinTech companies are founded by enthusiastic entrepreneurs with a clear vision and a great idea to reshape financial services. However, there are exceptions where the banks or a consortium of banks founded the company (like Payconiq in the Netherlands, LUXHUB and i-Hub in Luxembourg or itsme in Belgium).

EBRC and The Banking Scene joined forces to interview key stakeholders from Luxembourg’s FinTech and banking industry. They shared their opinions on the current and future state of FinTech and financial services and how these two will interact in the future.

The second category comprises the mature FinTech organisations that have been operating for many years or even decades. Still, most were created in the years following the financial crisis of 2009. These companies are often referred to as "scale-ups" today: they achieved many successes and have reached a large scale, These experts’ insights provide a better becoming mature, yet agile companies. Scaleunderstanding of how financial services may ups gained momentum, and all they need now evolve over the years and what differentiates is the scale to turn the company into a profitable the winners from the rest. business if this is not already the case. FinTech, the abbreviation for "Financial Technology", is defined as the technology and innovation that aims to compete with traditional financial methods in the area of delivery of financial services. It is an emerging industry that uses technology to improve activities in Finance1.

Financial technology - Wikipedia

The third category comprises the start-ups, young companies that may or may not have signed their first customers and projects and use available cash predominantly to develop their products and services.

INTRODUCTION

CONTRIBUTORS

CHRISTOPHE BOURBIER CEO AT LIMONETIK

ALEXANDRE CASTAING HEAD OF CYBER, TECHNOLOGY AND FRAUD RISK EU AND APAC AT ROYAL BANK OF CANADA

RIK COECKELBERGS 6

MANAGING DIRECTOR AT THE BANKING SCENE

PHILIPPE DANN HEAD OF RISK AND BUSINESS ADVISORY EBRC

NICOLAS GERARD MANAGING DIRECTOR PRODUCT MANAGEMENT STATE STREET BANK

OUR CONTRIBUTORS ARE EXPERTS IN THE FIEL

CONTRIBUTORS

DAVID HAGEN

ERIC MOUILLERON

ICT ADVISOR, HAGEN ADVISORY

CEO AT BANKABLE

BERTRAND KAUFFMANN

ANGELA NICKEL

GLOBAL HEAD OF MARKET SOLUTIONS PRIVATE BANKING, SOCIÉTÉ GÉNÉRALE LUXEMBOURG

CEO OF COMO GLOBAL

NATHALIE KNOPS

JONATHAN PRINCE

HEAD OF BUSINESS TRANSFORMATION AT BIL

CO-FOUNDER AND CSO AT FINOLOGEE

LAURENT MAROCHINI

JACQUES PÜTZ

HEAD OF INNOVATION AT SOCIETE GENERALE SECURITIES SERVICES

CEO LUXHUB

PASCAL MOROSINI

NASIR ZUBAIRI

CEO i-HUB

CEO OF THE LHOFT FOUNDATION

LDS OF THE FINANCE INDUSTRY AND FINTECHS

C O V I D - 1 9 I M PA C T O N F I N T E C H

DOS SIER

COVID-19 IMPACT ON FINTECH O

bviously, COVID-19 has shaken up society, and that includes the FinTech industry. All these individual companies faced their own challenges in 2020. Overall, our experts are convinced that the pandemic had a positive impact for most FinTech companies.

The winners of the consolidation in traditional Finance that will occur in the coming years will be those that take their digital experience in the back-end and the front-end to the next level. This will require them to re-think the way they work; it will not involve the digitalisation of existing processes, but a complete re-engineering, with external support.

Laurent Marochini, Head of Innovation at Société Générale Securities Services, emphasised this by saying: "It’s definitely an acceleration, but what was built over the last 15 months does not constitute a revolution. In some cases, companies started from scratch and built everything in just 6 months." Although COVID-19 was considered as the last needed push for companies to embrace digitalisation, it also brought many challenges and the financial services industry is not in the best shape, especially not in Europe, according to Nasir Zubairi, CEO of the LHoFT Foundation. With a return on equity just below 6%, he expects consolidation in the banking market as part of the transformation it has been undergoing in recent years.

Source: Unsplash

Add the impact of COVID-19 on customer expectations, and some banks find themselves in a precarious situation. Circumstances forced customers to bank digitally. This made them understand what it means in terms of experience. Banks that lagged behind because they failed to see the urgent need to optimise the digital banking Bertrand Kauffmann, Global Head of Market experience now need to catch up and need help. Solutions Private Banking, Société Générale Luxembourg, stated that "COVID-19 accelerated the digital transformation of many businesses. It convinced more sceptical people to adapt to digital. In that sense, it certainly helped the digitalisation process in general. For FinTech, in particular, I think that there were probably some winners and some losers."

C O V I D - 1 9 I M PA C T O N F I N T E C H

COVI D-1 9 D IS CON N E C T E D FI N TECH COM PA N IE S

espite the obvious triggers from COVID-19 in favour of FinTech, there are valid reasons why some FinTech companies risk a more challenging time to build their business. Yet, recent figures show that FinTech never got more funding than right now, with Q1 2021 being "one of the largest quarters on record across deals, funding, exit activities and mega-rounds", according to CB Insights2.

FINTECH INVESTMENT TRENDS

Europe saw the largest QoQ increase in funding Quarterly funding ($M) by continent, Q1’20 – Q1’21 4% $0.3 $43 $223

$5,049 $15 $313 $405

$15 $42 $714

$45 $334 $534

$4,763

$2,048 $1,842

$2,234 $1,765

$1,802 $1,908

$4,198

$5,731

$5,666

$6,211

$2,261

$45 $193 $999 +180% QoQ in Europe

$3,668

$12,822

Nevertheless, our panel of experts observed that, Q1 Q2 Q3 Q4 Q1 despite the recovery plans, investors might be more 2020 2021 North America Asia Europe South America Australia Africa selective with regard to the companies they invest 24 in. Eric Mouilleron, CEO at Bankable, explained: "Investors and banks were already very strict on whom they partner with, but now a FinTech's something LUXHUB has been advocating since its "These entrepreneurs often have a high level of balance sheet will undergo closer scrutiny to make very inception. New challenges demand combined agility, and their ability to innovate and to learn will efforts." help develop their acceptance of failure, enabling sure that the company has a long-term future." them to re-start at a later date, with an even better One of the main challenges faced by start-ups solution. That is the resilience that they have, which Alexandre Castaing, Head of Cyber, Technology and Fraud risk - EU and APAC at Royal Bank of Canada, resides in the fact that they lack a reputation is, as you know, crucial these days." expects a concentration of key market players, of trust. Long before the COVID-19 pandemic, where smaller stakeholders face more challenging banks were reluctant to partner with companies "Beyond their regulatory obligations, FinTechs times unless they have a unique technology in- that survive from funding round to funding round, and RegTechs consider international standards without any guarantee of survival over the next 12 ISO 27001 (Information Security) and ISO 22301 house or address a real problem. months, that do not know how to sell their services (Business Continuity) certifications as key success Great ideas will continue to catch investors' interest, or how to respond to compliance and security factors for their business. Three main reasons but these investors will be more cautious than before. concerns. This lack of confidence has grown ever justify this approach: first to better follow regulatory obligations, second to capitalize on international Jonathan Prince, Co-Founder and CSO at Finologee since the start of the health crisis. certifications to develop their business across any stated that "Some new FinTech companies will be Angela Nickel, CEO of COMO Global, stated that countries, third to secure their businesses for both successful, others will fail because the answer this additional uncertainty for FinTech companies their customers and their own shareholders. Thus, they're bringing to a specific problem or pain point is not the right answer, not at the right moment, not "created a negative social and psychological they limit the risk of reputational impact that could impact. In some FinTechs, it led to a semi-paralysing mean the immediate end of the adventure and the right way of addressing it." approach in terms of hiring, development and self- deadly losses of capital. " explained Philippe Dann, from EBRC. Banks urgently need to ramp up their innovation confidence." initiatives, not POC projects, but concrete longer term deliverables. According to the experts, this had an impact on young start-up companies in 2020. As Jacques Pütz, CEO of LUXHUB illustrates: "The pandemic also evidenced that rapid and efficient innovation can be achieved through collaboration -

We can only hope that these entrepreneurs don’t give up. They may be disconnected from financial services today but their creativity and perseverance may reconnect them again later, as Nathalie Knops, Head of Business Transformation at BIL, shared:

"FinTechs and RegTechs that understood that earlier on, sometimes aiming for an ISO certification before even contacting banks, have a better chance of success because they speak the same language as their potential clients."

State Of FinTech Q1'21 Report: Investment & Sector Trends To Watch - CB Insights Research

C O V I D - 1 9 I M PA C T O N F I N T E C H

COVI D-1 9 C ON N E CT E D FI N TECH COM PA N IE S

OVID-19 is often called «the biggest POC in the recent history of humankind». Hedwige Nuyens, Managing Director of the International Banking Federation, even spoke about: "a gigantic world-scale stress testing exercise"3. Both observations are equally valid for financial services. The health crisis showed the importance of digital financial services, and it forced banks to re-think their business in order to service customers remotely.

Society was in lockdown, and bank branches were closed. Simultaneously, businesses were under severe pressure and needed support from banks. Consumers massively adapted to e-commerce. Digital banking became the norm. Christophe Bourbier, CEO at Limonetik, observed that "COVID-19 didn’t transform our industry; it merely accelerated the adoption of digital by the end-customer. Where digital was a nice-to-have before, it became a must-have." While many banks needed external support to accelerate their digital efforts to guarantee business continuity, Nasir witnessed some projects between LHoFT members and banks being put on hold at the beginning of the crisis, and Alexandre confirmed this, saying, "It may have been challenging for FinTech companies to keep liquidity at the right levels, as banks re-focused on core business capabilities in the context of the pandemic."

Gerard, Managing Director Product Management, State Street Bank: "Banks needed solutions fast, and they were open to new functionalities such as online signatures, which reduced the sales cycle of FinTechs that collaborate with banks. With treasury at the top of their strategic agenda, the resulting faster cash flow was very welcome." FinTech companies with a proven track record and a valid solution for assisting banks in this process thrived. This trend is expected to continue in the foreseeable future. Jonathan Prince, Co-Founder of Finologee, believes in the positive impact for start-ups and scaleups "because more consumers demand digital services and FinTech can help banks with that in a time- and cost-efficient manner". They had the required security and compliance certifications and a number of clients that successfully implemented their solution. All this made them trusted partners for future projects.

not about the solution anymore, but about the companies’ strategy as a whole. How secure is the solution? Is the company resilient or does it collaborate with trusted suppliers? Do the company or its services have certifications? It is now about the big picture and unfortunately some FinTechs or RegTechs tend to forget about this". Eric Mouilleron made the parallel with Kodak, saying the FinTechs will help banks avoid reaching this so-called Kodak moment by providing solutions that offer a great, real-time customer experience while interacting with a bank’s legacy system. FinTech companies that have already collaborated with banks saw a higher willingness to move projects forward at a faster pace, given the urgency of the situation.

Angela Nickel remarked that in the long term, there are risks being "an anti-democratic place divided into the haves and the have-nots, where there are a few financial giants taking the lion’s The summer period changed this, as banks share of the digital market, and many small investigated how to better manage future risks, "Banks tend to challenge FinTechs and RegTechs players competing for the slice of the pie that for which they required external support. Nicolas more" explained Philippe Dann from EBRC. "It is those giants have not yet devoured." 3

The Banking Scene - Three macro trends shaping the bank of the future: Digital - Local - Sustainable

THE FUTURE OF FINANCE IS EMBEDDED

DOS SIER

THE FUTURE OF FINANCE IS EMBEDDED 11

lthough every situation has winners and losers, the future will be built ‘together’. It will be partnership-based with different organisations bringing their core strengths together for a better financial world. We will see less explicit Finance, as financial services will increasingly be embedded in nonfinancial customer journeys, with open banking and open Finance accelerating this evolution.

THE FUTURE OF FINANCE IS EMBEDDED

FROM BRANCHES TO T H E S I N G L E I N T E R N E T V I L L AG E

n the past, bank branches were an essential building block of banking. Branches served as a marketing tool, an office, a sales channel and sometimes even a product factory. They made the brand and the identity of a bank. Consumers and businesses would strike up a banking relationship with the one with the nearest office. The Internet transformed this. Technology reduced the world to a central village in which every bank with a basic digital infrastructure was, and still is, reachable by any consumer or business in the country, continent, and sometimes worldwide.

clients through personal contact. Digital banking is there to reduce friction today, not to replace human interaction. Technology sprouts excellent opportunities to create a better customer experience in the office for private and wealth banking.

Jonathan Prince concurs: "Factually, already five years ago, the number of people going to a branch dropped by 80%. Opening a Digital banking today remains mainly limited branch today is no longer the solution it once was. The vast majority to transforming existing processes into digital components. Whether a customer goes to a branch of people no longer go to branches for daily banking services." or buys a financial service product online or in an Over the last few years, people have adopted digital banking for app, the process remains the same. For example, increasingly more use cases. This evolution is making branches a converting administrative tasks to digital channels redundant and expensive cost centre for banks. Branches didn’t have in branches can save time for advisory services and a bright future ahead of them before the pandemic, and today this personal relationship management. future evolved from cloudy to dark.

Retail banks all offer the same types of services People massively adopted digital services, not just for daily banking with similar conditions. Except for the logo, name activities but also for financial advice, especially in retail banking. and colour, they rarely have a unique selling point. "I think, ultimately, Finance has to work towards the notion of The trend of open banking and open Finance may change all this. becoming invisible," said Nasir. He emphasised how difficult this transition is for banks as it completely upends their entire way of working, with a tremendous impact on employees, product delivery, sales etc. Bank advisors often strongly believe in personal relationship management, but in the end, the question is: who ever wanted to buy a mortgage or an investment fund? Most banking products are merely a means to an end. Private and wealth banking are expected to evolve in the same direction, although probably at a slower pace. According to Jonathan, these niches have a lot more added value and services to offer to their

THE FUTURE OF FINANCE IS EMBEDDED

E M E R G I N G FI N A N C E H Y BR I D I ZAT I O N

nce banks start to open up to third parties and allow external brains to be creative with the bank’s building blocks, a true transformation can occur.

"Things have sped up: we will see more digitalisation and more focus and not just on the backoffice as it was traditionally because banks need to drive down their costs in Finance in Europe," explained Nasir. "Although Revolut and others have acquired many customers, those are often not primary accounts. People will continue to rely on the traditional banks, but I think it will take time to drive a wholescale change in behaviour at the front-end. But those changes are coming." Open banking not only educated banks on the importance of payment and account information, it also started the discussion on open Finance and open data, enabled by the API (Application Programming Interface) economy. Essentially, APIs are making banking, as we know it, a lot more modular. For most banks, this way of banking is entirely new. Banks will need to invest in new skills, as Nathalie shared: "I firmly believe that APIs and open banking will help us to move forward and certainly to develop and use new partnerships. If you start using APIs, you still need a proper understanding of what is behind the API." The easy integrations allow banks and third parties to join forces faster, better and in a completely secure way. Open banking must make banking easier for the end-customer. Open banking triggered much discussion on the topic of banking becoming a platform. "We have the clients, and they have a service. They can access those clients with their services through a partnership", said Bertrand Kauffmann. "For example, on an open platform developed by a bank, they can offer their services through their apps. So yes, the trend is very positive. We cannot grow without each other." Another possible consequence of open banking and the API economy is that of embedded Finance. Business Insider4 defines embedded Finance as "a term for when non-financial companies offer financial products and services to their customers while retaining complete control over the customer experience. Essentially, a financial institution distributes its products through a nonfinancial company." They estimated a global market cap potential of $7.2 trillion for all embedded Finance companies, including those pivoting into the trend. By taking advantage of embedded Finance capabilities, financial service providers open up an endless list of possible new sales channels, in addition to the traditional ones such as branches, brokers, mobile and Internet banking, etc...

The Embedded Finance Explainer from Insider Intelligence (businessinsider.com)

THE FUTURE OF FINANCE IS EMBEDDED

Just look at what Stripe did in the United States. They set up a service called Stripe Treasury, for which they partner with banks to offer a bankingas-a-service API. This way, they can provide bank accounts without issuing them themselves. At the other end of the chain, they partnered with Shopify. Every merchant connected to Shopify can now hold money, pay bills, and spend money from their Shopify account without directly talking to a bank.

will become used to it. Many banks do not yet Hyper-connectedness, ecosystem thinking and understand this." partnerships are essential to making that happen. Organisations are no longer capable of doing For retail banking, this means that banks would everything themselves. They need to build on their start integrating their services into external strengths and seek out reliable partners for noncustomer journeys. Banks take away the pain of core activities. This will bring new challenges and dealing with financial products while offering their many more opportunities. clients the value of these products at the right place and time.

Jacques Pütz: "Embedded Finance will induce a lot of changes over the next five, 10, 15 years, and this evolutionary environment will remain a constant. Nowadays, it is not enough to develop a product and be at ease for five years; it has become key to reinvent yourself almost permanently. The competitive landscape is evolving, and customers are more willing to accept change. Indeed, they

Nasir Zubairi: "I look forward to the day where I can turn up to buy a car and the loan is automatically approved, and I don't need to go and talk to a bank about it. I look forward to the day that I decide to buy a house, and within a matter of seconds via an app on my phone or via the seller, the estate agent can tell me that my loans have been approved, and here you go; it's done."

THE FUTURE OF FINANCE IS EMBEDDED

F IN T E CH S , CATA LYSTS OF F I N A N C E TRA N S F ORM AT I O N

hristophe Bourbier, CEO Limonetik, believes that the more financial services will be embedded, the better it is for users and banks alike. Because this is all new to banks, they will need support from FinTech companies, in his opinion, not only as regards product delivery but also to gain greater traction in a shorter period.

bank limits FinTechs’ possibilities. So, let the FinTech live on its own, potentially serve its own customers, and collaborate with banks to reach a much broader customer base," she explained.

"This is easier said than done," confessed Jacques Pütz: "It’s the only way to go. Telling a board of directors, an executive, or the CEO A similar message came from the banks we interviewed, which stated of a bank that their most precious person in the future will be an API that it will be necessary to create these embedded experiences, even business model developer is quite a challenge." if they are challenging to achieve. APIs are new to banks, as is open banking. Thus far, banks controlled The best way forward, according to Nathalie Knops, is to work their own sales channels. Now they need to let part of that control together, pooling strengths: "I would favour keeping this idea go. This requires both an attitude adjustment and education on the that FinTechs are on one side, banks on the other, and both have technology side of things to make sure people in the banking industry their reason for being there on their own, both forming part of an understand those in the FinTech industry, and vice versa. ecosystem in which they can help each other. I'm not too fond of the idea of banks buying FinTechs. Many examples show that the FinTech spirit, the agile nature of the FinTech, as well as the ability to serve customers end up being lost after an acquisition. Being owned by a

THE FUTURE OF FINANCE IS EMBEDDED

TH E TR A N S F ORM AT IO N O F TH E FIN A N CIA L S E CTO R I S ST R O N G LY L I N K E D TO THE CLOU D RE VO LU T I O N

or several years, the financial services industry has been facing a deep transformation requiring agility and constant innovation. The use of technology has brought about new experiences that are redefining how customers consume products and services in all sectors: Finance is obviously also concerned with clients requesting more interaction and immediacy, as well as more flexibility.

Within EBRC, the most profound revolution consisted in the advent of the cloud, as the company has now become what can be called a "trusted and agile IT provider". Combined with the DevOps methodology, it provides customers with agility to rapidly adapt to changing business requirements, as well as to transfer applications and enhance developments linked to those new needs. DevOps advocates the containerization of apps and the creation of microservices, which result in the agile deployment of applications that are interoperable through APIs to the benefit of the end-users.

This new gold rush for the ultimate financial services experience will stimulate some FinTech companies to position themselves in direct competition with banks. It will encourage a new wave of innovation. FinTech companies that can leverage this with specific solutions to new customer needs can succeed as financial services providers. It may take more time, but if their mission is crystal clear, if they have a relevant purpose for being, they can thrive. Christophe Bourbier: "The direct approach is sexy, as well: the concise selling cycle, direct access to clients, which is highly valued by VCs and people who are looking to invest." Nonetheless, some experts argue that once these FinTech companies get too influential, banks will attempt to buy and absorb them or even destroy them to avoid competition and take over.

David Hagen, ICT advisor, Hagen Advisory: "It is a question of cost and opportunity. A big bank will try to do it itself or look at which FinTech could do it for them. To achieve this, it will eventually set up an incubator, which will allow it to keep an eye on the FinTechs present, before choosing to invest heavily, or even buy the one that best meets its needs. If the FinTech represents a niche that gives it a unique advantage in the market, it will buy it in order to take exclusive ownership of the idea and the technology. The objective of going through a FinTech is to reduce the reputational risks in case of failure, but above all to reduce costs and to leave itself the opportunity of a profit in case the FinTech also markets its services to third parties. The bank presents itself as a venture capitalist while targeting an operational return."

THE FUTURE OF FINANCE IS EMBEDDED

NEXT FI N TECH H OTS P OTS

ooking at the future, we believe that FinTech will continue to shake up and shape the banking industry; some FinTech companies will actively service the end-customer while others will concentrate on helping banks to take the lead. That is no different from the past. However, the USPs for achieving this will evolve and may change over time. We asked our experts about the subdomains that are most promising for FinTech companies in the coming years. B2B companies that support financial institutions in their effort to achieve a more digital reality scored highest in that respect, with RegTech and payments and sustainable Finance at the top of the list.

T H E R E GT E C H O PPO RT U N I T Y

Success no longer comes with just a great idea. "If you have the right purpose, if you have the business case that will make the difference in society, it will always be the right case because you will have no issue believing in it and defending it," Nathalie Knops explained.

"We, the banks, have to provide a broad range of services. It is challenging to be good at every single one of them. A FinTech will be able to specialise in one and be very good. Partnering with a FinTech can help banks save time and resources, and it can help banks focus on core services like loans. Doing so also allows us to focus on our legacy system modernisation programmes and regulatory projects."

Jonathan Prince: "There is more and more pressure on banks from the regulators. Keeping up with the pace of innovation and just complying with these new rules will be a major challenge for banks. RegTech is one of the areas where entrepreneur-driven FinTech initiatives are going to thrive."

ne of these purposes is to help banks reduce their infrastructure costs and free up budget to create more value in the domains where they excel. Another one involves improving transparency by assisting banks in fulfilling their reporting requirements and carrying out their client and transaction screenings.

KYC and AML are a continuous struggle for banks. The lockdown made the pitfalls in these processes more visible. Almost every expert referred to digital onboarding and signatures as the winning trends in the pandemic, exactly for this reason. "If you want to maintain this level of trust, you need to ensure that you know your current customers, and that you are appealing to them when you do an onboarding, or even when you do an update; it is important to provide them with the right tools," explained Jonathan Prince. "Digital onboarding is key, as are digital updates, including periodic reviews to ensure financial institutions have the latest information on one's identity." Recently, new initiatives have brought banks together to come up with bullet-proof solutions. FinTech companies will assist in closing the net. By connecting multiple organisations, they increase the number of touchpoints, and the right technology will make all this more transparent while respecting privacy.

THE FUTURE OF FINANCE IS EMBEDDED

According to Jacques Pütz, this is an enormous opportunity for FinTech companies: "FinTechs that can provide a mutualised platform that is more secure and does not impact the competitive advantage of the bank will be successful. Therefore, platforms that provide the necessary basics will have a big opportunity to thrive. These types of FinTechs and RegTechs will definitely be needed in the years to come. Without the collaboration with these innovative players, banks risk losing their market share to new entrants. Banks cannot survive in the status quo because their legal obligations are increasing, the margins are getting thinner, and the competition is growing". LUXHUB is a vivid example of that, but in the RegTech market you can also take the example of i-Hub and its CEO, Pascal Morosini: "i-Hub brings something revolutionary into the ecosystem. The idea of i-Hub is not revolutionary, but the product itself and its usability are. It decreases the participants’ operating costs, and it promotes greater digitisation and sharing amongst those who will contribute directly with their documents, whether they are natural persons or legal entities."

POWER E D BY E B RC : AC C E L E R AT E YOUR B U S IN E S S D E V E LO PM E N T

ith "Powered by EBRC" (PbE), EBRC’s intention is to create a community of FinTech and RegTech partners focused on innovation solutions accelerating the digital transformation of the financial sector and accelerating its growth. The PbE catalogue allows traditional financial players to transform by picking innovative solutions as part of an "as-a-service" model which is regulated and secured because it is operated in the framework of EBRC. Business hybridization has become a key topic in the banking industry lately, as legacy players are leveraging solutions provided by agile specialists with mutualized costs. On top of that, EBRC’s clients can rapidly access any PbE service on EBRC infrastructure with peace of mind.

THE FUTURE OF FINANCE IS EMBEDDED

TO SPEE D UP PAY M E N TS

he area of Payments is another domain in which mutualising services makes perfect sense. Banks offer payment services because they always have since the invention of automatic teller machines and card payments. Over time, the profits on payments decreased and so did the added value that banks provide compared to other payment service providers. In 2021, payments are no longer a unique selling point for banks and there is hardly any way to differentiate between them. FinTech solutions that can be rolled out white-labelled, that let banks and other corporations shine in their digital efforts have a bright future ahead of them.

/year /year

NOW NOW

Christophe Bourbier: "I believe that we will see more interaction between banks and FinTech because it is a matter of survival. It was a matter of survival before this crisis, and it has become even more substantial now for banks. Therefore, collaboration is going to be stronger."

The opportunities are there. Angela Nickel took the example of remittance to make that point, stating that the global remittance market is around $500 plus billion a year and expected to grow by 2026 to about $950 plus billion a

2026 2026 year. Digitalising these payment flows will not only bring down the average cost to the endcustomer, but the industry is also making efforts to close the gap of digital inclusion, creating a better world for the poorest of the world.

THE FUTURE OF FINANCE IS EMBEDDED

The team behind Finologee has been working in payment for 10 years now and they are seeing in the world of banking the same evolution as that which the telecoms industry faced years ago. The margins on payments went down, as did the cost of offering digital payments. They partnered with banks to set up Digicash. That way, they reduced the cost per member, and they created a scale from day one.

with the budgets to create the best possible interfaces, tools and user experience. Trusted partnerships are the only way forward to avoid banks becoming dumb pipes, like telecom companies or MNO (Mobile Network Operators).

"In financial services, it all boils down to enabling two things: transactions today, and transactions tomorrow," said Nasir Zubairi. "That's what it all is. Even when you look at investment funds, when "Some Banks were smart enough to consider partnering with small you look at options trading, or capital markets, etc., it's all about companies; they were termed FinTech, RegTech, start-ups; even enabling transactions. The simpler you can make it, the better." though they didn't share the same jargon, culture or way of driving business. On one hand you had the incumbent players focusing on With the rise of cryptocurrencies and according to the research in risk mitigation and on the other young companies hungry to build at Central Bank Digital Currencies, payments will keep evolving in the speed and sell tech products and services" said Jonathan Prince. coming years, and the questions facing banks are: "I believe that this is a sign of banks smartly adapting to a new •(a) do they want to keep playing a prominent role in payments? fast-moving environment." •(b) if so: how can they fulfil this role? He added that banks need this kind of partnerships to ensure that they do not get disintermediated from the process by global giants

DEVELO P IN G N E W SERVICE S W ITH ART IF ICIA L INTELLIGE N C E

The bank’s daily dialogue with the client will be digital, and interaction with actual people will be less frequent", said Bertrand Kauffmann. "Many processes will be carried out by the clients themselves. Improvements in technology will support that. Everything related to data and artificial intelligence will be pushed more towards the top of the agenda than it used to be."

want to sell based on client needs. You could do that with all the data points you have. One of the challenges here really revolves around data quality."

Nicolas Gerard works with State Street in another banking market segment, but sees the same priorities: "We need better solutions to make sure data sits at the right place, available 24/7 for the As banks move towards servicing their customers digitally, right insights. We cannot afford to lose time on data." proactive advice needs to be reinvented by the industry. Of course, banks cannot have artificially intelligent systems without The rise of Open Finance and the potential to connect to all clear, comprehensive and usable data. Banks cannot survive a kinds of new data sources will bring a new wave of innovation digital revolution without the right data pools from which to extract in the coming years, according to Nicolas, with more insights on customers. relevant insights. Alexandre Castaing: "AI has a big role to play in understanding With more reporting requirements for a bank’s efforts on ESG, customer behaviour, automating processes and at the same time the data priority will not reduce anytime soon. defining new targets. Think about loans or insurance that you

THE FUTURE OF FINANCE IS EMBEDDED

A GREENER, M O R E TO K E N I S E D WO R LD

SG (Environmental, Social and Governance) features on the agenda more prominently than ever before, with new ideas popping up on a daily basis. Financial services are doing everything they can to show that creating a greener world is high on their agenda. So, our experts see in companies which contribute to a better and a greener society a third category to watch. The easy win is getting rid of paper administration. Nicolas: "COVID-19 is creating a desire for a greener work environment: less paper, but also less travel, less commuting. That’s a positive impact on the workplace of the future." With a rush for more documentation and transparency on sustainable assets, this area is very appealing for new blockchain and tokenisation use cases. "Issuing sustainable securities or green securities costs more than issuing standard securities, because validating the sustainability or the greenness of the security requires additional expenditure in reporting, data management, etc., for the investors. You can reduce the overall cost of issuing a security by lowering the issuing costs using tokenisation," explained Nasir Zubairi. "Then maybe at a later stage, using the smart contracts embedded in the tokens as a form to connect and automate a lot of that data reporting and data management, you're going to drive down the cost of issuing sustainable securities, and therefore make them more attractive." "Focusing on greener or sustainable activities is not easily achieved for companies. This effort demands a full inspection of the company at all levels. They usually focus all their efforts on the front-end services; after all, it is the easiest place to effect change. However, it can also be easy to forget the back-office capabilities of your company", explained Philippe Dann "Fortunately, solutions exist and digitalisation and sustainability can cohabitate." Laurent Marochini shared that "in the future, successful models will be a combination of different things including, as you said, artificial intelligence with blockchain, blockchain with cybersecurity, and ESG. You need to monitor data, so you need to secure them. You need to have solutions for traceability, where you can use blockchain. In the Luxembourg blockchain lab, 8 to 10 start-ups are working on ESG elements."

S U C C E S F U L LY H Y B R I D I Z I N G Y O U R B U S I N E S S

DOS SIER

SUCCESSFULLY HYBRIDIZING YOUR BUSINESS

lthough FinTech stands for 'financial technology', our experts didn't mention 'technology' at all as an essential element for success. Of course, the essence is financial technology, but it will not differentiate them from the competition. How promising a FinTech is depends on other differentiators, in the same way as the product-market fit. All these differentiators link back to interpersonal relations. Jacques Pütz added that FinTech companies should try: "to be more fin and less tech. As many FinTechs and/or RegTechs are regulated entities, they need to understand the importance of first ensuring their compliance. This is non-negotiable… yet FinTechs often find that hard to accept". Angela Nickel put it as follows: "in this current transition to a digital economy, FinTech entrepreneurs are usually young people savvy on the technology, but without financial knowledge; and financiers are usually people with financial skills and capital, but without much technological knowledge." Although she believes this means that the ones with the capital end up steering the relationship, it is clear that one cannot live without the other. But what will be the differentiating elements of genuinely successful FinTech companies in the near future? From the interviews, we identified three differentiators.

S U C C E S F U L LY H Y B R I D I Z I N G Y O U R B U S I N E S S

B UILDI N G T RU ST

rust is not for sale: it requires a lot of energy and dedication to reach a situation where an organisation gains the trust of its peers, as Nasir Zubairi explained: "You can't build trust with consumers or businesses overnight, whereas the traditional Finance industry has a tremendous amount of trust. Therefore, bringing the core capabilities of a FinTech with its agility, creativity, innovation and marrying that with the core capabilities of banks: scale, resources, trust, liquidity and flow, I think that is a win-win situation." Being trusted by your peers, your customers and prospects is important in B2C, but it is vital in a B2B context. Own your technology instead of outsourcing it. This will help FinTech companies to be more trusted; according to Eric Mouilleron: "FinTech companies that own their technology have an advantage because they control their key assets, control what they deliver, and are accountable for it." Accountability is a very valuable asset in selling your services.

"Trust is at every corner of the relationship between the FinTech and the banking institutions, concurred Philippe Dann. We are talking about: •(a) very sensitive data where a data leak can mean the end of an institution •(b) a sector where every second counts. Banks cannot tolerate a single second of downtime. Their solution must be up 100% of the time, whatever the technology used." "Those two criteria are at the heart of the partnership between FinTechs, RegTechs and Banks. Where some companies talk about "Zero Trust", we have adopted a philosophy of "Digital needs Trust". Agility and Security can work together and you can have both without concessions; this motto is reflected in our Trusted Services". The fact of the company having a solid financial situation is another essential element in building trust. A FinTech company’s balance sheet will determine its health and the projects it is involved in.

Of equal importance, according to David, is the regulatory know-how: "One pitfall for FinTechs is that they don’t understand how the regulations apply to themselves, and sometimes that the other partner needs to be regulated." This consideration is fundamentally undervalued in the field of data and AI. Being part of a trusted network will accelerate the process of becoming a trusted component in the ecosystem, which is why organisations like LHoFT are so important. They support their members with inspiration sessions, training, network opportunities, and so much more.

DOSSIER

P E O PL E SK I L L S

here are certifications and labels for trusted technologies, all of which are essential for proving your solution's value, but a company's human capital is equally important. People are the ones that open doors to start selling and make sure that clients remain satisfied after going into a partnership. Christophe made this tangible by saying: "The revenue I'm generating with clients is nearly proportional to the time we spend with them."

them to your clients and that way sustain the company's growth. Without the expertise and the skills of your collaborators, you're not going to do much."

"A couple of years before, outsourcing the IT was off the table for most FinTechs and RegTechs. They now understand the importance of it and how they can put all their resources on addedvalue services or projects for their clients, explained Philippe Dann from EBRC. Start-ups Bringing the right team together will make or can now focus on what they know and do best, break a company. Great technology companies which is a win-win situation." are the result of a talented team that backs the company. As a result of the pandemic, remote work spiked, and this will be permanent, as Angela Nickel Jonathan Prince: "Leadership and ownership rightly stated: "We can find highly qualified are the crucial ingredients to make your FinTech team members in places where we could have successful. If you don't have skin in the game, never imagined exploring before. The transition then the pressure is totally different. If you do, to remote work got into the picture of pragmatic you need to make sure that your company is possibilities, and for a lot of us, it’s becoming a growing and gaining more clients to be profitable. permanent possibility. Thus, the need for strong To do so, you need great products, which requires virtual leadership skills has never been greater; great employees to build them, to be able to sell and this is a major challenge for FinTech."

AGI LI TY BY D E S IG N

e spoke about initiatives to help banks to mutualise costs and services. If FinTech companies want to thrive as the saviours of banks in their efforts to become digital, the capacity to scale on very critical applications is essential, according to Eric Mouilleron: "Bankable builds, runs and operates multi-currency multi-wallet consumer or SME digital banks for Banks and Fintech; All our clients are launching "digital twins" to support a strong business case with one or multiple cross-border products. Having these world class clients live is a good validation of Bankable’s proprietary multi-tenant 24/7/365 tech stack. We help Fintech challenge Banks and we help Banks fight back with the same configurable platform."

it is challenging to work with a small player when it comes to processing thousands and millions of transactions every day." The agility and flexibility of FinTech companies are often quoted as the key differentiators in comparison to banks. Niche expertise makes them extremely smart in a narrow domain but also allows them to focus their attention on a limited set of functionalities. FinTech companies that can combine that with fast adaptability to the wishes of their customers have a competitive advantage. It allows banks to streamline their own processes without losing too much of their internal way of working.

Nicolas Gerard: "We are a 40,000-employee company, which comes with a certain nimbleness in our development cycle. If we go to an external party, it’s to counterbalance This was confirmed by Alexandre Castaing: "The key to successfully that. If they don’t provide this required agility, it does not make sense to add them as creating this ecosystem is how you incorporate all the elements to a long-term partner, although it isn’t easy to assess that from the beginning.” give the user a good experience. The change should be happening in the back-end. I think that's where resilience is critical. As a big bank,

CONCLUSION

C O N C LU SIO N

echnology companies need other skills and assets to make a difference in a future where technology is publicly available at a relatively low cost. Financial services have always been at the forefront of innovation and mixing technology and business. The financial crisis in 2007 accelerated the digitisation for both front-end and back-end. With the pandemic that sped up the uptake of digital banking solutions by the end-customer, the industry is ready for a new wave of change. This wave of change will be characterised by partnerships. Banks cannot keep pace if they keep building their own technology stack and if the internal culture is not ready for external influences. Banks will look for non-financial service providers to help sell their products and services, and they will reach out to FinTech companies to ensure everything is set up in a compliant and secure way. The commoditisation of technology has led to a change in their USPs: in the past, the best technology would win the contract, but today the human factor, the people behind the technology, is the unique selling point. The evaluation of the team will predominantly determine whether or not they can convince prospects to become clients. Trust comes with the capacity to scale and the flexibility to adapt to the client’s wishes in a compliant way. This requires an agile mindset but also deep knowledge in specific areas of financial services, whether that is payments, green Finance, regulation and compliance, or anything else. Successful FinTech companies are those that are well connected. They are open to feedback, training and support, and they can share success stories, so the network becomes an ambassador for their brand through word of mouth.

About EBRC EBRC – European Business Reliance Centre Founded in 2000, EBRC aims at becoming a European Centre of Excellence and Trust Centre in the management and protection of sensitive information. EBRC has developed a unique value proposition for its clients and partners focused on Trust and Cyber-Resilience: EBRC-Trusted Services Europe. In order to provide the highest security and quality of service, EBRC has certified its services end-to-end: ISO 27001 (information security), ISO 22301 (business continuity), ISO 20000 (IT service management), ISO 9001 (quality), Health Data Hosting-HDS, PCI DSS level 1 (payment security). EBRC meets the financial sector regulations and holds “Professional of the Financial Sector” (PFS) accreditation. From its three Tier IV-certified Data Centers, EBRC operates its own sovereign European cloud, EBRC-Trusted Cloud Europe, offering public, private and hybrid deployment models over 100 international destinations and the full range of Managed Services EBRC - Trusted Managed Services. EBRC and its subsidiary Digora, employ over 340 experts and consultants based in Luxembourg, France, Belgium and Morocco. EBRC-Trusted Advisory Services ranges from advice on Risk Management, Cyber-Resilience, Cyber-Security to IT Transformation. With a strong historical presence in the international banking and financial sectors, as well as in the healthcare and international institutions markets, EBRC advises and operates clients in sensitive and critical businesses: e-commerce, industry, pharma & biotech, public sector, defense, space, energy, critical operators, large law firms, FinTechs & RegTechs, and sensitive start-ups.

TRUSTED ADVISORY SERVICES Risk Management, Cyber-Resilience, Cyber-Security, Data Center Advisory, IT Transformation and support in ISO certification processes, Cloud Readiness Assessments, Cloud Advisory, GDPR, and more. TRUSTED MANAGED SERVICES 24/7 Agile ICT Outsourcing Services, based on ITIL and international standards and best practices. TRUSTED CLOUD EUROPE A fully certified European leader offering 3 deployment models: public, private or hybrid cloud, all operated from secured Tier IV-certified Data Centers, thus providing access to market clouds in over 100 destinations. TRUSTED SECURITY EUROPE Security Operating Services TRUSTED RESILIENCE SERVICES Business Continuity & Recovery Services, Trusted Backup & Recovery Services, Crisis Management. TRUSTED DATA CENTRE SERVICES High-availability Data Center Services (3 Tier IV-certified Data Centers – 17,000 sqm of IT server space) 100% green energy Largest carrier-neutral hotel in Luxembourg offering international connectivity European broadband connectivity (Low latency rates with the major European cities)