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Luxembourg – A constantly changing financial market

An article by Emmanuel Servais, BA Finance at Talan in Luxembourg about the acceleration of the digitalization of the Luxembourg banking sector.

The importance of operational banking efficiency has been in the radar of all banks in the Luxembourg market for several years.

With directives such as AML/KYC, MiFID II and PSDII among others, financial institutions had to develop and implement increasingly automated processes leading, at the same time, to the optimisation of their costs, a simplified product approach and much more complete customer knowledge. As a result, the CRM became (or should become!) the central island of the banks’ information systems. Indeed, by reorienting the operating model around the customer, institutions know their customers better, and can anticipate changes in their needs and improve performance, cost and revenue.

At the same time, Open Banking (resulting from the PSD2 directive and transposed into Luxembourg law for two years) is one of the many innovation avenues that are completely disrupting and transforming the Luxembourg market. Thus, promising numerous technological advances, four of the largest Luxembourg banks have launched a shared platform in order to facilitate the exposure of customers' account data externally through the management of APIs, in compliance with the regulations in force. 

At the same time, across Europe, bank customers are skeptical about how secure is their financial data. Indeed, according to a study conducted by ING in 2020 among private individuals residing in 13 European countries (including 500 in Luxembourg), only 13% of respondents believe that voice recognition is very secure, 22% for facial recognition and passwords and 30% for fingerprints. Luxembourgers are more sceptical than the European average, with rates falling to 3%, 15% and 18% respectively in these same categories.

Furthermore, there is no doubt that the widespread use of open banking solutions and other alternative authentication methods will accelerate the digitisation of Luxembourg society and will change the management of costs and sources of commissions in the near future.

One of the main Luxembourg banks has adopted and opened up the Open Banking service by offering its customers centralised access. They can now have a global and unique view of all their accounts held in different Luxembourg banks, on a single platform.