Digitalisation has become an ever more important trend in financial services, especially since the advent of mobile devices which could process financial transactions. The Covid-19 crisis has certainly accelerated this process and underlined the importance of adaptability.


Luxembourg has put the transition of the existing financial industry at the heart of its financial technology strategy. This means making sure that banks, asset managers, insurance companies and all other financial institutions operating in Luxembourg have the tools they need to remain industry leaders. These solutions can be provided by established firms or start-ups, from abroad or already based in Luxembourg.

The Luxembourg House of Financial Technologies (LHoFT) serves as our national Fintech platform and as the interface with other global Fintech hubs, which are the source solutions for the Luxembourg financial industry. The LHoFT brings together financial institutions, Fintech innovators, research and academia as well as public sector authorities to drive forward innovation and the development of solutions to meet specific industry needs. It acts moreover as a soft-landing platform for Fintech companies from abroad, which want to access the local financial sector and market their solutions across the EU.

Besides the LHoFT, Luxembourg is home to several incubators and accelerators, which help to ensure that the country remains at the vanguard of the latest technological developments. Through its relevant research, the University plays an active part in the ecosystem and engages in demand-driven applied research projects in collaboration with the financial industry through the University’s Interdisciplinary Centre for Security, Reliability and Trust (SnT). SnT creates genuine, long-lasting competitive advantages for companies with a presence in Luxembourg. Besides numerous partnerships with financial sector firms, SnT recently signed a partnership with the Luxembourg financial sector regulator (CSSF): its first project focuses on leveraging AI to increase the speed and efficiency of analysing fund documentation.

Innovation also requires funding. While government-backed funding initiatives, such as the Luxembourg Future Fund or the Digital Tech Fund are available, private funding needs to be ensured as well. To this end, our objective is to connect Luxembourg-based Fintech start-ups with VC funds abroad, as well as to attract as many as possible of them to set up operations in Luxembourg.

New and emerging technologies such as the use of Distributed Ledger Technology (DLT) for financial services in Luxembourg are numerous, in areas such as payments, fund administration, reporting, clearing, and even ownership tracking of alternative assets.

Several Fintech companies in Luxembourg have focused on developing blockchain-based solutions to meet industry needs. As an example, the Luxembourg Stock Exchange provides “digital signatures” on all documents publicly disclosed by issuers via a decentralised public blockchain, which is based on Ethereum, and the Luxembourg-based FundsDLT consortium has built a blockchain-based fund purchase platform, allowing investors to purchase funds through a decentralised platform on their smartphones. Other Luxembourg start-ups in this space have developed pioneering tokenisation platforms.

The CSSF was the first European regulator to adopt a clear legal position on virtual currencies, leading to the licensing of two major crypto exchanges as payment institutions in 2016 and 2017. In 2019, the Luxembourg parliament passed a law on the usage of distributed ledger technology for the circulation of securities. The law provides greater transparency and legal certainty around the use of distributed ledgers and blockchain technology by considering their usage equivalent to other secured electronic-recording mechanisms for the transmission of securities. This was only a first step, and Luxembourg is committed to adapting its legislative framework in order to encourage innovation by the financial industry in leveraging DLT while providing legal certainty.

Regulatory expertise, risk management and compliance are key strengths of Luxembourg’s financial services industry. Unsurprisingly, a significant number of FinTech companies in Luxembourg focus on serving the regulatory and compliance needs of Luxembourg’s financial centre: ranging from KYC and fraud detection to fund reporting and investor information tools. By using the latest technologies, many financial institutions are today focused on reducing their regulatory and compliance costs of tomorrow.

Considering Luxembourg’s central role in finance through its investment fund and capital markets activities, Luxembourg also needs to be taking sound positions on the tokenisation phenomenon, which has the potential of changing the way in which capital is raised.

Besides DLT, the other technology that will (and is already) fundamentally re-shaping financial services, from back-office to client relations, is Artificial Intelligence. While Luxembourg sits on a wealth of data on cross-border investment flows, much of this remains untapped, not only from a business perspective but also from a research vantage point, where it could shed valuable light on global trends in investing. Luxembourg will investigate means to facilitate the use and management of such data, on an anonymised or pseudonymised basis, to encourage the development of new solutions. Regtech is a promising area for such solutions, especially as a source for training algorithms. Significant potential also exists for synergies with the Luxembourg-led EuroHPC supercomputer project


Innovation in finance is not limited to technology but comes in many guises, such as product innovation. Luxembourg has a long track record of financial innovation.

The international Eurobond, or Eurodollar market was born in Luxembourg in the 1960s, following the listing of the world’s first Eurobond (by Autostrade) on Luxembourg’s Stock Exchange. This market continues to this day to provide a platform, raising over 10 trillion euros in capital globally. At the time, Luxembourg was chosen for its openness to such a new product as well as the possibility to list in a foreign currency.

Innovation in asset management by the adoption of efficient and widely accepted fund structures has become a cornerstone of the Luxembourg value proposition. Examples of this kind of innovation can be found in Luxembourg’s compartmentalised mass-market products, such as UCITS umbrella funds or the more recent creation of the Reserved Alternative Investment Fund (RAIF) structure which facilitates a rapid time-to-market. In the future, new structures, such as a Real Estate Investment Trust (REIT) will be useful additions to Luxembourg’s toolbox.

Another example of Luxembourg’s readiness to innovate has been the success of its efforts to connect global investors with China’s capital markets. When Chinese authorities decided to open up to foreign investment through different schemes, Luxembourg’s securities regulator CSSF was the first European regulator to discuss with its Chinese counterparts how to make the EU framework and the Chinese framework compatible. As a result, the CSSF was in a position to authorise the first UCITS fund to invest through the RQFII scheme in 2013 and the first to invest through the Shanghai-Hong Kong Stock Connect programme in 2014. First-mover advantage and, more importantly, the expertise gained by both the regulator, as well as by our financial services professionals, explain why Luxembourg has almost a third of the global market for funds invested in mainland Chinese equities and bonds.

The CSSF authorised the first UCITS fund to invest through the RQFII scheme in 2013 and was the first to invest through the Shanghai-Hong Kong Stock Connect programme in 2014.

Luxembourg’s tradition of innovation often emerges as a direct result of the cooperation that characterises its ecosystem. Industry associations play a key role. The Luxembourg Banker’s Association (ABBL), the Luxembourg Insurance and Reinsurance Association (ACA), or the the Association of the Luxembourg Fund Industry (ALFI) as well as the the Luxembourg Private Equity and Venture Capital Association (LPEA) – each of these provide a high-level professional forum in which new developments and opportunities in their sectors can be discussed. Such a dialogue exists not only within the associations but also between them and other stakeholders and regulatory authorities. In this way, new market trends can be identified and understood as soon as they emerge so that appropriate regulatory frameworks can be put in place and new opportunities spotted.


The Covid-19 crisis has vividly demonstrated how important it is for firms to be able to adapt their operations and even their business models to unforeseen as well as unforeseeable circumstances. Throughout its history, Luxembourg has time and again demonstrated its own capacity to adapt rapidly to a changing environment. In the finance sector in particular, Luxembourg has been especially adept at redefining itself and seizing new opportunities.

Most recently, Luxembourg has emerged as a key European payment and e-money hub. Leading international players in the payments sector, such as PayPal, Amazon Payments and Rakuten chose Luxembourg in the mid-2000s as their EU hub, along with an array of B2B and B2C third-party payment providers. This role has been confirmed with the relocations of a number of payment firms in the wake of Brexit, among them giants like Alipay and trendsetters such as AirBnB. With the advent of PSD2, Luxembourg has established itself as home to one of the largest open banking platforms in Europe with specialised providers of API gateways catering to the needs of banks.

Going forward, Luxembourg will seek other avenues of diversification for its financial industry, building on existing corporate finance and capital market activities. These business areas could be boosted by leveraging multiple aspects of Luxembourg’s ecosystem, such as our multi-jurisdictional and international law expertise, robust corporate law framework, state-of-the-art legislation on securitisation, as well as the political and economic stability of the country.

Building on its success in attracting many non-life insurance companies to set up their EU hubs in Luxembourg as a hedge against Brexit risks, Luxembourg will adopt a more systematic approach towards encouraging the development of this important sector. The aim is to consolidate this new cluster in order to become one of the EU’s leading insurance hubs. This should go hand-in-hand with a strengthened focus on developments in Insurtech.

Echoing our recent publication entitled “Amazonisation is the future of European financial services”, we will study the development of platforms in greater depth and look in particular at ways in which Luxembourg could position itself vis-à-vis financial services platforms that will emerge in the future. At the same time, we will closely monitor the ongoing trend of non-financial firms that are developing ancillary financial services, such as payment systems integrated into hospitality, car-sharing or other mobility schemes. Here again, Luxembourg’s financial services ecosystem, combined with best in class ICT infrastructure, R&D support and a data-driven economy strategy at government level will be able to host the financial services activities of these new and emerging players.

Diversification also has a geographic component. Luxembourg has been very successful at building strong relationships with markets outside the EU over the last couple of years, with China being the prime example. It should also seek to repeat this success in other markets, in particular certain emerging markets.

Ambititon statement :

In order to build on Luxembourg’s proven track record of product and technological innovation, by 2025, we will:

  • be an acknowledged
    European centre of excellence for the post-PSD2 open banking industry
  • push
    for the development of European legal frameworks in innovative new finance sectors (e.g. tokenisation)
  • multiply
    the channels through which our industry can source innovative solutions and support collective projects which strengthen Luxembourg as a financial centre
  • provide
    Fintechs with a wide range of funding options
  • accompany
    the growth of the insurance market with an increased focus on Insurtech solutions
  • create
    a conducive environment for data-driven financial services, both for financial institutions themselves and new market entrants coming from outside the traditional financial industry

Continue Reading the other chapters :

  • At the Heart of Europe

    Further expand Luxembourg's role as a cross-border centre of excellence and EU hub.

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  • Complementarity to other EU Centres

    Deepening Luxembourg's role as a prime destination for international finance.

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  • Leading on sustainability

    Leading the drive to increase the total level of funds in sustainable investments from the billions to the trillons of euros.

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  • Pushing Innovation

    Build on Luxembourg's proven track record of product and technological innovation.

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  • Responsible Governance

    Continue to build Luxembourg's Financial industry on sustainable principles in taxation and regulation.

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  • Nurturing the Human Dimension

    Support the continued expansion of the Luxembourg financial industry.

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