Silicon Luxembourg caught up with PwC Partner Philippe Forster and Regulatory & Compliance Director Isabelle Melcion-Richard, to discuss the financial and regulatory trends of the future.
According to your 2025 & Beyond report the financial services industry is “in the midst of a significant transformation”. What are the major trends in this transformation?
Philippe Foerster: This is not an easy question to answer because the current geopolitical tensions, technological developments and a changing regulatory environment are shaping the course of this transformation.
However, some of the key trends that matter in the financial industry’s transformation are the increasing importance of alternative capital providers, the client-driven shift to a platform- and ecosystem-based financial services industry, the ESG revolution and the forthcoming regulatory changes.
Banks and fintechs are also changing the financial services industry. The latter are getting banking licences while the former are partnering or buying fintechs to digitalise or improve their services. Regarding payments, the backbone of our economy, we have identified several trends which range from the proliferation of digital wallets to more emphasis on the customer experience to improved cross-border payments.
Your report also states that “Global Cashless payment volumes will almost triple by 2030”. What are the next steps Luxembourg and Europe as a whole need to take to prepare for this?
Philippe Foerster: Many actions need to be taken to adapt to this change. Firstly, a global standard for payment infrastructures and services needs to be achieved. CBDC and the European payment initiatives are signs that we are going in the right direction.
Secondly, regulators need to move away from (or at least complement) an entity-based approach to (with) an activity-based approach. The CSSF has started to move into that direction with the set-up of its “Innovation, Payments, Market Infrastructures & Governance” department.
Thirdly, rules have to adapt to the increasing number and volumes of stakeholders and the changing nature of payment actors. This entails encouraging innovation, but ensuring the protection of consumers, market confidence and AML considerations. These are only some of the actions that need to be taken.
Thinking about the different areas that could be impacted by regulatory changes over the next 5 years, which areas of regulation are you most concerned about?
Isabelle Melcion-Richard: There are many but one that is really key is the ongoing monitoring of new entrants and non-traditional players. Regulators should also be able to discuss financial innovation and the technologies linked to it. Regulators need to listen to the voice of the industry but that will be a pretty difficult task because they will also need to find the right balance between investor protection, data protection while supporting innovation.
Luxembourg is taking the right path showing a pragmatic approach and promoting a constructive and open dialogue with the payment actors. However, non-traditional players sometimes struggle to adapt to European financial-related regulations.
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