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Chris Hollifield, Fintech Advisor & Business Development at LFF chris.hollifield@lff.lu Jean Diederich, Vice Chairman of the DBFI at ABBL jean.diederich@wavestone.com Andrey Martovoy, Fintech Advisor at ABBL martovoy@abbl.lu Fred Giuliani, Head of IT and Digitalization f.giuliani@bcee.lu Alex Panican, Head of Partnerships & Ecosystem Development at LHoFT alex.panican@lhoft.lu
LUXEMBOURG BANKING SECTOR
Chris Hollifield Fintech Adviser chris.hollifield@lff.lu
A small country at the heart of Europe‌
…a major International Financial Centre…
Source: IMF, 2016
‌and a global exporter of .nancial services Source: WTO, 2018
WHY?
450+ Free movement of GOODS
CAPITAL
SERVICES
PEOPLE
MILLION CUSTOMERS
7000+ FINANCIAL INSTITUTIONS
23 MILLION SMEs
AA A
BANKING SECTOR IN LUXEMBOURG
Number of banking licenses
126
May 2020
Headline .gures
Employment
26,390
March 2020
Total assets
EUR 821.8 bn
December 2019
Banking income December 2019
Source: CSSF
EUR 12 bn
Other, 22
International banking sector
Germany, 22
United Kingdom, 3 Brazil, 3 China, 14
Belgium, 3 Sweden, 4 Spain, 4
USA, 5 France, 14 Italy, 5 Japan, 6 Luxembourg, 8 Source: Banking licenses per country of origin, CSSF, data as of 31.05.2020
Switzerland, 13
7%
6%
22%
22%
Banking activities
Source: PWC, Banking in Luxembourg, Trends and Figures 2019
7% 11%
33% 40%
22%
17% 11%
9% 12%
9%
14%
26% 15%
Switzerland
Germany
13%
21%
21%
11%
7%
12% 33%
14%
22%
7% 13%
Luxembourg Private Banking Corporate Banking Retail Banking Treasury Custody Asset Servicing Service Centre Mortgage Bonds
France
China
US/UK
16%
8% 16%
29%
20% 4% 21%
16%
4% 8%
LUXEMBOURG FINANCE IS OUR TRADE
More information, videos & newsletters on www.luxembourgforfinance.com
Chris Hollifield Fintech Adviser chris.hollifield@lff.lu
LUXEMBOURG BANKING INDUSTRY SHOWCASE Jean Diederich Vice-Chairman, Digital Banking and FinTech Innovation Cluster
30 June 2020
Who we are
Since 1939 The ABBL is the oldest and largest professional association in the financial sector
Members include • Banks • Market infrastructures The voice of the financial sector in Luxembourg
• Post-trade institutions • Payment institutions • The Luxembourg Stock Exchange • Law firms
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• Consultants and auditors • Other financial sector professionals
Members & related members 2
What we do
We represent and develop the professional interests of our members
We provide intelligence, resources and services to our members
We serve as a hub for exchanges on key issues affecting the financial sector in Luxembourg
We fully support promotion and branding efforts for the Luxembourg financial centre
Our EU representative office in Brussels actively supports our EU lobbying efforts We fully support promotion and branding efforts
We are committed to a responsible banking and financial sector in Luxembourg
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Management Board
• 20 TECHNICAL ADVISERS provide you with technical and strategic input on all major issues of relevance to the Luxembourg financial centre. • OUR EU REPRESENTATIVE OFFICE IN BRUSSELS actively supports our EU lobbying efforts and monitors EU regulatory developments.
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ABBL Clusters ABBL Clusters represent major banking and financial business lines in Luxembourg
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Digital Banking and FinTech Innovation Cluster
The Digital Banking and FinTech Innovation Cluster (DBFI) was created in January 2016
* The list of DBFI members as of December 2018
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Digital Banking and FinTech Innovation Cluster
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Background: o
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Vision: o
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The Cluster unites members and FinTech firms interested in exchanging knowledge and ideas on new disruptive technologies and on how digitalisation and the rise of FinTech may impact banking and financial services being offered to more and more demanding customers
ABBL’s DBFI Cluster believes in the importance of technology and its innovative use in making financial institutions in Luxembourg more customer-centric, technologically advanced, data-driven, and highly competitive
Mission: o
The Cluster’s main objective is to support ABBL Members in achieving digital transformation of their business
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All initiatives of the DBFI Cluster, in coordination with the Government of Luxembourg, Luxembourg for Finance, LHoFT, FinTech firms and other stakeholders, aim at creating an attractive and competitive FinTech ecosystem in Luxembourg with unique selling points
Governance: o
Chairman: Jean Hilger, Senior Vice-President, Banque et Caisse d’Epargne de l’Etat
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Vice-Chairman: Jean Diederich, Partner, Wavestone
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Vice-Chairman: Raoul Mulheims, Co-Founder & CEO, Finologee
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Representative of the DBFI at ABBL’s Board of Directors: Philippe Seyll, co-CEO, Clearstream 7
DBFI Actions and Activities
GOAL 1: To share knowledge EVENTS: • Matchmaking events to facilitate co-operation between ABBL members and selected domestic and foreign FinTech firms • FinTech Greets: speeddating events for banks and FinTech firms (jointly with KPMG) • Workshops on various digital banking and FinTech innovation topics
EDUCATION: • Interactive conferences “ABBL Meets Members” dedicated to specific digital finance topics • Encouraging financial institutions to set up their innovation facilities and labs in Luxembourg
• Master Degree in Digital Finance (jointly with the University of Luxembourg) • Training courses on “Digital Finance” (jointly with the House of Training)
• Seminars on Open Banking, when regulation brings innovation, PSD2 and APIs (jointly with APSI, the LHoFT & WAVESTONE)
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DBFI Actions and Activities
GOAL 2: To cooperate with stakeholders • Working Group “Cloud Computing” • Working Group “Distributed Ledger Technology” • Working Group “Stablecoins / CBDC / Libra” • Working Group “Big Data / Data Analytics” • Contribution to FinTech working groups of the Luxembourg High Committee for the Financial Centre • Bilateral exchanges with key stakeholders (alphabetically): ACA, ALFI, APSI, BcL, CNPD, CSSF, EIB, ESM, Fedil ICT, ICTLuxembourg, LFF, LHoFT, and others • Representing the ABBL in the European Banking Federation’s Digital Strategy Group as well as in several EBF working groups (e.g. Blockchain Technologies, Cloud Computing, Platforms) 9
DBFI Actions and Activities
GOAL 3: To contribute to FinTech ecosystem • Study: COVID-19 impact on operational, organizational, technological and HR aspects of financial institutions (jointly with KPMG) • Study: Bank and FinTech Cooperation in Luxembourg (jointly with Arendt Business Advisory) • Study: Second edition of the survey on Cloud Adoption by financial institutions in Luxembourg (jointly with KPMG) • Study: DLT Adoption by financial institutions in Luxembourg (jointly with Wavestone) • Spinning-off the research project Application of the DLT to KYC Processes (funded by ABBL Foundation for Financial Education and SnT of the University of Luxembourg) • Launch of the new research project Trustworthy AI for instant AML due diligence (funded by ABBL Foundation for Financial Education and SnT of the University of Luxembourg) • List of Luxembourg banks interested in opening a bank account to foreign and domestic FinTech firms • Luxembourg FinTech Map: www.fintechmap.lu
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ABBL FinTech Community
The ABBL and its Digital Banking and FinTech Innovation Cluster propose a FinTech Service Pack for FinTech Firms Subscription to ABBL’s FinTech Service Pack is a unique professional and networking opportunity presenting an exciting and direct connector to the financial industry in Luxembourg
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Further Information and Contacts
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Contacts:
GOAL 3: ToMartovoy, contribute to FinTech o Andrey Adviser – FinTech, ABBL, martovoy@abbl.lu ecosystem •
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Further information: o
www.abbl.lu
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www.abbl.lu/dbfi-actions-and-accomplishments
o
www.fintechmap.lu
Video teaser: o
https://vimeo.com/306133323
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Thank you for your attention
INTERNATIONAL SHOWCASE
OUR MISSION The LHoFT Foundation is a public - private sector initiative that drives technology innovation for Luxembourg’s Financial Services industry, connecting the domestic and international FinTech community to develop solutions that shape the world of tomorrow.
PUBLIC – PRIVATE PARTNERSHIP
LEADERSHIP CIRCLE PARTNERS
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ASSOCIATE PARTNERS
WITH THE SUPPORT OF
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INCUBATION
LUXEMBOURG FINTECHS MAP 5
220+ fintechs firms - 4300 Employees - €560M in Revenues - €130M in Capital
WHY LUXEMBOURG ?
LEADING FINANCIAL CENTER 1st Securities listing in EU 1st
Microfinance center in EU
Premier Wealth Management Center in Eurozone (> 350 billion AuM) Leader in Green Bonds & Climate Funds
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1st RMB Center in EU 2nd Financial center in EU 2nd largest fund center in the World (> 3.9 trillion AuM) Home to EIF and EIB AAA rated country
LUXEMBOURG’S ATTRACTIVENESS
ü Highly Accessible Financial Regulator ü Corporations open to innovation and
partnerships ü License application in English, French and
German ü EU passporting license (400M consumers) ü Regulated cloud services ü Seven Tier 4 Data Centers ü Partnership with Key Fintech Hubs around
the World ü Highly Qualified People
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SUPPORTING FINTECHS
FINTECH ECOSYSTEM VALUE CHAIN
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INTERNATIONAL NETWORK
25+ INTERNATIONAL PARTNERSHIPS
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THANK YOU info@lhoft.lu
Collaboration between FinTech’s and Banks ‌.some pitfalls and how to avoid them 30/06/2020
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I. Highly agile vs highly regulated
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Banks have checks and balances I.
Business
II. Risk Management III. IT (security / operations / applications) IV. Legal
Ă You need to have theses stakeholders in your meetings.
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II. FinTechs are an “operational risk” for banks
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Business § Interest § Increase customer satisfaction through your product /service. § Increase profitability.
§ Fears § What if the new product / service is not successful? § How can we «stop» the new product / service if it is not a success. § Will the FinTech go directly to «my customers». § Remedies § Provide market analysis for your product / service. § Explain how you would market the product to the bank’s customer. § Build a value proposition for the bank.
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Risk Management § Interest § Keep the risk for the bank at a low level. § Fears § Will the FinTech survive the next 5 years? § How can we continue the service if the FinTech goes out of business? § Is there an exit strategy / path? § Do mistakes made by the FinTech harm the banks customers (liabilty)? § Remedies § Provide your business plan. § Offer a plan B if your FinTech should go out of the market (exit options). § Explain how you will mitigate the risks your FinTech is facing.
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IT Security § Interest § Maintain secure and trusted systems. § Fears § Loosing customers trust. § Getting hacked. § Data leakage / non GDPR compliant. § Remedies § Provide security architecture documentation of your system. § Explain in details how you handle different security scenarios. § Show external security audits and PEN tests. § Have a ISO 27001 certification / are you going to be supervised by the national banking authority? 7
IT Operations § Interest § Keep the system up and running.
§ Fears § If the FinTech is «offline», the bank system will be impacted. § Fintech will not be able to run the system 24/7 (Desaster Recovery / Business Continuity». § Does the FinTech have skilled technicians that help connect the systems. § Remedies § Provide SLA for your product / service. § Provide your Disaster Recovery Plan and Business Continuity Plan. § Describe your suppliers / partners (Tier 4 Data Center provider, …..) § Offer a helpline for the technicians of the bank. 8
IT Applications § Interest § Integrate cool new features in our banking software. § Fears § How do I integrate the Fintech’s technology? § Do they have interfaces for legacy programming languages (Java, .Net, Cobol,…)? § Does the FinTech have skilled technicians that help me interfacing their solution? § Does their system need upgrades / modifications and therefore induce changes in our system? § Remedies § Provide adequate documentation and code snippets in .Net and Java. § Fix an upgrade policy and underline the backwards compatibility of your service. § Propose to help to build the common interfaces. § Provide a sandbox / common playground environment as well as an acceptance environment. 9
Legal § Interest § Have a sound relationship covered by the legal agreement between the parties. § Fears § Does the agreement cover all important items (SLA, Liabilities, intellectual property, termination)? § Does the FinTech understand the agreement? § Is the agreement enforceable? § Remedies § Provide a fair agreement model for discussion. § Explain what elements you have explicitly taken care of. § Allow for application of national laws and jurisdiction. § State that the agreement will be executed in good faith. 10
III. Open banking collaboration Some lessons learned
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Do’s and don’ts § DO’s § Inform the bank that you want to use their open-banking APIs. § Announce periods of extensive testing. § If you need a specific non-existing API, ask the bank if it is willing to provide it. § If the bank’s API does not work 100% § contact the bank through the offered communication system and propose a call to clarify the issue. § Fix deadlines for the fixes. § Propose to help with the test of the fixes. § DON’Ts § Don’t play unfair.
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