Sasha Baillie, CEO of Luxinnovation, Jerry Grbic, CEO of ABBL, Vincent Arnal, CIO of LALUX, and Olivier Beaujean, CIO of Cargolux ran a round table during TNT Symposium on November 29th. They all detailed a key dimension, trying to explain ‘how to compete successfully in the radically human future’.

Jerry Grbic shared his observations and thoughts about the key challenges and opportunities for the sector when it turns to digital technology differentation.

Progress starts with the talent, but never happens without appealing to our most radically human instinct, which is the trust. The mission of ABBL is to promote the sustainable development of regulated, innovative and responsible banking services, where trust is at the centre.

A competitive disadvantage compared to neo-banks 

"Trust is needed for a finance system to work and banks offer it as they stand for stability helped by regulators who aim at increasing the stability of the banking system all over the world", said Jerry Grbic.

The expert came back to banks’ history and evolution throughout the years, directly linked to security and so, to clients trust:"Banks are seldom at the forefront of technological evolution, because the banking activity is highly regulated. A secure offering and a stable environment are more important than introducing disruptive technologies. Banks experience a disruptive technological shift and the financial sector will look quite different in the future, but banks will adopt to new technologies like Blockchain." 

The expert made a highlight on crypto assets, basing on PwC recent study among bank to affirm that there’s "a cautious optimism for Luxembourg: only 18% of respondents already consider crypto-assets as a strategic priority, and 43% expect them within the next 2 years". He continued: "I believe that more guidance and a clear framework will allow financial institutions to go further in the next years, as example with the coming into force of the upcoming European regulation on crypto assets MiCA (Markets in Crypto Assets)."

"I’m confident that new technologies like DLT will create interesting opportunities for financial institutions. Looking at the disaster of the cryptocurrency exchange platform FTX, people got reminded that such investments are risky, but more importantly, they got a painful reminder of the concept of counterparty risk." expressed Jerry Grbic. "Built on the trust of their customers, banks, that are already evolving in an impressive regulatory framework, will offer successful and safer solutions, in a very stable environment."

"That’s basically why the ABBL facilitates collaboration between banks and Fintechs, accepting non-banks as members for a few years now, and organizing an event in January, called ‘CEO meets Fintech’, as example. The idea is also to ‘build trust’: we need to bridge the cultural differences that exist between banks and fintechs."

"In the future, we will have fewer banks than today, but they will be very strong and living up to the expectations of all stakeholders, meaning they will offer stability and have huge financing capacities, therefor deserving the trust of their clients and allowing them to serve the needs of their customers."

Challenges

Jerry Grbic highlighted 3 challenges for the banking sector in the future:

        • The increasing regulation, and the importance of same level playing field: "according to Chris Skinner, a well-known fintech commentator, a bank is subject to around 5 times more regulation than the average tech company", he said.

        • The need to invest in infrastructure now and heavily: "adapting heavy and outdated legacy systems to provide new services and products, maintaining the security clients need is costing a fortune, in both time and money".

        • The talents: "among the many challenges faced by Luxembourg banks, the ability to attract, train, maintain and further develop highly skilled professionals is key".

Opportunities

Once again, the CEO of ABBL noted 3 central opportunities :

        • The opportunity of regulation for banks

"Today there is no or little regulation that is protecting investors in Crypto assets. Compared to the MIFID regulation, investors have no protection and no clear framework." Jerry Grbic gave an example: " ‘influencers’ can ‘sell’ investment proposals without any control. There is a need for regulation. After a hurtful experience of losing money in such unregulated markets, the new generation might turn to their banks as they are looking for a secure framework for their investments. Here again, we come back to the concepts of Trust and Confidence."

        • The need of collaborate within the ecosystem: mutualization and partnerships

"The ABBL is well placed to facilitate mutualization among Luxembourg financial players.", added the expert. "Today, we work on a Research Project with the SnT, Interdisciplinary Centre for Security, Reliability and Trust of the Luxembourg Uni, to develop a mutualized AML model based on AI to decrease the number of false alerts in transaction monitoring. Also, we offer mutualization brainstorming sessions with our members."

Concerning the partnerships, Jerry Grbic completed: "There are many initiatives throughout Europe to bridge the gap between the traditional banks and the start-ups. This is important to remain competitive and it will be beneficial for everyone: the banks, FinTechs and clients. And the Luxembourg Eco-system is ideal for developing such joint-ventures as the country is an open economy, people are close to each other, and all banking activities are represented."

        • Explore Data

"Banks are used to manage data, at the heart of innovations, in a secure environment for years. We need to be smart about how we use them, and to be sure that our clients continue to use us for banking services. Consumers will be in control of their data, that’s why they need to trust their banker. A recent study conducted jointly by the ABBL, CSSF and LSFI on sustainable finance showed that most people willing to invest seek advice from their banks."

He concluded: "Banks are more than data, we have expertise, knowledge and experience."