Leading international players in the payments sector have chosen Luxembourg as their hub to serve this fast-growing EU payments market. In Luxembourg they can leverage a regulatory framework of payment licenses to passport their services across the EU (Payment Institution and E-Money Institution licenses), the country’s supportive FinTech ecosystem, as well as its state-of-the-art IT infrastructure.
This has led to the Emerging Payments Association (EPA) choosing Luxembourg as the HQ for their EU representation office in March 2020. The EPA is a leading professional association of the international payments sector.
Regulatory expertise, risk management and compliance are key strengths of Luxembourg’s financial services industry. Unsurprisingly, a significant number of FinTech companies in Luxembourg are now focused on serving the regulatory and compliance needs of global finance.
Solutions developed in Luxembourg are assisting asset managers gain oversight and transparency of their global governance network and processes, giving them a clear competitive advantage. Other companies based in the Grand Duchy are developing digital onboarding services for financial institutions.
Other Luxembourgish solutions are using advanced big data technology for compliance, counterparty risk management, fraud detection and competitive intelligence.
Big Data and AI
Luxembourg’s role as a major global fund centre provides fertile ground for the development of AI projects. A number of Luxembourg based companies leverage natural language processing to provide automated solutions for a wide array of financial operations.
Moreover, the data generated and processed by the Luxembourg financial industry is a rich source for tools reliant on the discovery of patterns in large datasets. AI in this field presents significant opportunities for the Luxembourg financial sector, both in terms of using data analytics to inform business strategy and to make use of trend identification in fields such as KYC or suspicious transaction monitoring.
Distributed Ledger Technology, Tokenisation and Crypto
Luxembourg is also home to a number of developments in the field of “crypto compliance”, including solutions covering AML software for cryptocurrency onboarding, as well as being home to the European hubs of a number of crypto exchanges.
Building on the Luxembourg financial centre’s traditional expertise, the Grand Duchy is also at the forefront of companies leveraging Distributed Ledger Technology (DLT) to develop such tokenisation services, bringing liquidity to new asset classes.
DLT also has applications to support the business processes of one or more organisations, using the technology as a foundation stone of their infrastructure. In Luxembourg, consortia are working on using DLT to support processes of a wide gamut of services, ranging from financial services such as fund transaction processing all the way through to public sector use cases.
Many global insurers have their EU hubs in Luxembourg and are using technology to disrupt the traditional insurance business. InsurTech firms in Luxembourg offer ultra-customized policies, social insurance, and use new data streams from internet-enabled devices to dynamically price premiums according to observed patterns of behaviour.
A number of micro-insurers are also using Luxembourg as a base from which to develop new insurance services that use technology to provide policies to individuals in developing countries who previously had no access to such risk management.
Luxembourg has been a global funds industry centre since the 1980s, so it is no surprise that it is a place where technology and financial expertise come together. A large number of FundTechs have set up shop in the Grand Duchy, either to provide tools to support the industry, or to tap into Luxembourg’s expertise in asset management to improve their own products.
There has been significant growth of interest in looking at ways crowdfunding and peer to peer lending platforms can also work with institutional investors. This increases both the firepower of such investment platforms, while providing potentially attractive returns for institutional investors at a time of persistently low interest rates. Several leading companies in the field make use of Luxembourg to bridge this gap.
Cybersecurity and authentication
Luxembourg has a long track record in developing and deploying security and authentication solutions, both in a research context and a professional one. It is home to centres providing cybersecurity training and cyberattack simulations, as well as being a base for companies providing digital identity and data security services.
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ECOSYSTEM AND FUNDING
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