Fintech As An Enabler For Our Financial Industry

Nicolas Mackel, CEO of Luxembourg for Finance, explains how startups and the LHoFT are helping the Luxembourg financial center pivot into the 21st century.

Photo: Nicolas Mackel / Credits © Kaori Anne Jolliffe / Silicon Luxembourg

Can you remind us what Luxembourg for Finance (LFF) is and what it does?

Luxembourg for Finance is a public-private partnership created 13 years ago to help develop the Luxembourg financial industry.

While we are best known for our event and communication activities, we also have a less visible mission focused on developing opportunities in geographic and thematic markets.

In 2014-2015, I was mandated by the Minister to lead a working group to reflect on all the initiatives to be taken in the field of fintechs. Our group had recommended, among other things, the creation of a national platform, the Luxembourg House of Financial Technology (LHoFT), with which we work closely on the fintech theme.

In a country whose economy is strongly influenced by financial services, we had to create a platform specifically dedicated to financial technologies.

The main goal of the LHoFT is not to develop Luxembourg into the European capital of startups but to attract solutions that will help the financial industry build its future.

It is about providing the industry with the channels and tools it will need to truly pivot to the digital era and move into the 21st century.

You are entering your 3rd term at LFF. What is your roadmap concerning fintechs?

If the LFF shareholders have agreed to renew my mandate, it is above all to maintain the direction we set 8 years ago.

I see this renewal as confirmation that we have taken the right actions and that we must continue in this direction. We will therefore work in continuity, in the face of an environment that is constantly evolving.

More concretely, it is a question of bringing financial institutions from all sectors to Luxembourg, with the aim of strengthening the Luxembourg ecosystem and seeing where the new opportunities are, both geographically and thematically.

As far as Fintech is concerned, we also operate in continuity, in order to attract startup solutions that are best adapted to the business models and practices of financial industry players.

The LHoFT plays a federating role, bringing together all the players in the market to work on different projects.

LFF has a business development role: we go out to the outside world to recognize and pursue startups that could be interesting for the country and for the people involved.

“In Luxembourg, 4 cryptocurrency platforms have been approved by the CSSF. They are primarily payment institutes for electronic currencies.”

What are the pillars of the Luxembourg fintech ecosystem?

Just look at the beautiful map illustrated by the LHoFT with the logos of the startups that are part of its system. This map shows us the pillars that make sense in Luxembourg.

So I would mention regtech, fundtech, blockchain, cybersecurity, and in 5th place artificial intelligence. These are the priority sectors for fintech.

What about cryptocurrencies? What assets, opportunities and threats do they represent for the financial sector?

In 2013 and 2014, we tried to identify the phenomenon. But in the end, I still didn’t understand its true utility. In the beginning, we thought that these currencies could possibly have exchange functions. Today, they are essentially speculative.

If people want to invest their money in virtual currencies, I don’t. What remains interesting in this phenomenon, is the underlying technology of the blockchain.

In Luxembourg, 4 cryptocurrency platforms have been approved by the CSSF. They are primarily payment institutes for electronic currencies.

Education, training of talents and local and international recruitment are major issues for the future of the financial sector and fintech in particular? What is your policy in this area at Luxembourg for Finance?

I chaired a working group on behalf of the High Committee of the financial center entitled “Talent strategy to serve Luxembourg’s financial industry”. With the quantitative growth and the qualitative growth of the Luxembourg financial industry, the availability of talent has become a real issue.

All countries and professions are affected. In this respect, the financial industry is in competition with other sectors, especially the technology sector, whose big players are snapping up all the good talent.

Today’s young people want to have a job that doesn’t just pay the rent, but that gives them something more in life. They want a job with purpose.

Since the last crisis of 2008-2009, the financial industry did not necessarily exert this power of attraction to them. We can hope that this trend will change with the fintech and sustainable finance themes.

To ensure the sustainability of the industry, we need to ensure access to the talent – at all levels and with all kinds of expertise, including but not limited to IT – that is necessary for its operation and development.

“Startups must continue to bring about this change, and work with all the financial players in the marketplace.”

How can we prepare tomorrow’s finance today in the face of the new uses of the next gen and the digital natives?

This is a complex question. It’s a question of seeing how regulation can keep up with technological developments.

But in order to prepare for the future, I think we also need to think hard and review the training curricula. This starts in elementary school: children are already taught the importance of science, languages and history. But perhaps we should also think about providing them with certain skills that will help them prepare for the jobs of tomorrow, which will certainly all be digital.

Luxembourg has always been able to adapt. What it needs to do is to help the industry to adapt by providing it with the tools it needs to join the twenty-first century.

The map of Europe is full of old financial centers, like Florence, Venice, Augsburg…, that at some point in their history missed the boat and failed to adapt. This is what we must avoid.

In the Grand Duchy, the authorities and the financial industry are working hand in hand and thinking together about the future. We don’t always have all the answers. But we are developing, testing and challenging them. And out of that we create something that has proven itself over the last 40 years.

Today we have a relatively solid foundation, but in less than 5 years it could cease to exist if we do not manage to adapt and innovate. So we must innovate!

How would you define financial innovation?

There are two things: firstly, a technological innovation; as the interface between an economic player and its customers, its way of selling its product or service. It is about improving the efficiency of internal processes, compliance, etc.

But innovation can be more than just technological: when China opened its capital markets, for example, the CSSF was one of the first Western regulators to meet with its Chinese counterpart, in order to discuss how to make the requirements of the respective systems compatible, and thus to allow investment flows from UCITS funds to Chinese shares or bonds.

Today, Luxembourg represents 43% of the global share of investments in Chinese capital markets. Innovation here means looking for pragmatic solutions to a changing world, and to accompany this change in the world.

What message would you like to send to Luxembourg and foreign startups?

We need to push creation and innovation, to bring about change in the financial industry. Startups must continue to bring about this change, and work with all the financial players in the marketplace, in order to develop truly solid and credible solutions, in the interest of the marketplace and its clients.

This article was first published in Silicon Luxembourg magazine. Read our full Fintech edition.

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