Changing finance to catalyze transformation - Part I

Writer Laura Campan

During this new edition of the European Finance Summit, seasoned experts delivered inspiring speeches on the natural yet challenging step finance is taking towards innovation.

Quantum Computing, the new black?  

French journalist and PME Finance President Jean Rognetta started the ball rolling with quantum computing: “In 2019, Google established what they called ‘Quantum Supremacy’ with a 35 qubit computer, making a calculation that would take more than 10 000 years for an ordinary computer, however powerful […] So, this is what we are heading at – or at least, that’s what the White House says.”

But couldn’t it also be a serious threat to the security of documents such as electronic passports? 

This is what led Infineon teams, in cooperation with the German Federal Printing Office (Bundesdruckerei GmbH) and the Fraunhofer Institute for Applied and Integrated Security (AISEC), to develop the first proof of concept for a more secure post-quantum passport – “and this is just the beginning of a long race between quantum calculus and quantum cryptography”, underlying the necessity of new training and education programs, like the French School of Engineering and Computer Science EPITA that now offers a major in Quantum.  

But according to Jean Rognetta, “the main use case remains finance, especially to manage large data sets […] It should be, very soon, better than anything you get.”

Bracing for Impact 

From an investors’ perspective now, the pandemic, and the crying need for global cooperation and sustainable solutions definitely turned the tide. Most wonder how they can diversify their portfolio and produce long-term benefits for society while still generating profits.

Expon Capital Principal Lily Wang first came up with funds: what are they actually doing – and must do – to climb the steep ESG learning curve?  

For Moniflo Founder and CEO Georges Bock, instead of asking their clients to choose between different types of funds – mainly between articles 8 and 9 – asset managers should rather embrace their values and ambitions. “Sustainability and impact definitions are very individual. Some believe nuclear power is sustainable while others hate it – and there is no legislation that will ever cover these feelings. This is why I believe that asset managers will start to look at customer behavior analytics to build up ESG policy.” 

Société Générale Private Wealth Management CEO Alexandre Cegarra also insisted on the importance of data access and analysis – which have to be fully integrated into the investment process and studentship policy, so as to influence the next generation. 

For LuxFLAG Head of Sustainability Operations Ahmed Ouamara, asset managers should pick the most relevant metrics according to their investment focus and mandate, without necessarily having to report on all of them. “If you are a fund with a theme on sustainable water management for example, you are not going to report on gender inclusion – it’s not relevant here.”

But as Luxembourg Sustainable Finance Initiative (LSFI) Communication Manager Maria Tapia wondered, what if education and training was the first step to take when promoting sustainable finance?

For EFPA Luxembourg General Manager Patrick Levaldaur, definitely yes. First, because training is key in this constantly changing regulatory environment, especially on sustainable issues. Financial professionals must be familiar with the different acronyms and be ready to answer any question customers and institutional investors may have – risking otherwise to lag behind. “Financial world is evolving and if you don’t catch the train at the beginning, it will be difficult to follow it. Whatever your position in the company – either on the retail banking or the administration side – there are a lot of risks to manage and to be trained for.” 

But is the market mature enough to offer training on such specific topics? 

Not for the moment. “People need to get the whole picture first, before going into detail” – by building their own learning curve through podcasts, readings, etc. “They need to see sustainable finance, not as a constraint, but rather as an opportunity to structurate the market.”  

Automating finance

Like all new concepts, it may be challenging to get a grip on what Decentralized Finance (DeFi) means. So, what is behind this technological development and what initially started with bitcoin?

As Paypal-FNR PEARL Chair and professor in Digital Financial Services Gilbert Fridgen reminded, DeFi has always been a quite controversial topic, especially from a compliance perspective. It is both seen as a revolution and a systemic risk for the financial ecosystem.

“There is a lot going on in the DeFi space” – from blockchain and smart contracts, to tokens. So, what can traditional financial services providers learn from that? According to Gilbert Fridgen, two major topics might help to either increase speed or reduce costs: inherent trust – by avoiding any manipulation – and automation. 

Talking about bitcoin and blockchain, how about Metaverse?

For France Meta VP Emmanuel Moyrand, everything is possible in the Metaverse: “You can share any type of information, socialize with people, organize events, contribute to improving the silver economy […] Tomorrow, you could have all the technologies at your fingertips including finance automation.”

Picking up on Web3 initiatives, Mandalore Partners Co-Founder and Managing Partner Minh Q. Tran introduced Binance, the world’s leading blockchain ecosystem and digital asset exchange. Willing to expand its business in Europe, the company is currently looking for investors “entrepreneurs or family offices investing in life insurance”

Undoubtedly the perfect transition for Finologee CSO & Co-Founder Jonathan Prince and Kartesia Group Finance Manager Marc Housieaux to talk about payments processes automation. 

In terms of digitalisation, banks are still lagging behind – a difficult situation Marc Housieaux depicted with his CEO and the dozens of tokens he has to carry around to access different bank accounts and have an overview of the group’s financial situation. 

Giving access to banking information to financial teams in the blink of an eye is undoubtedly one of the main challenges in banking today. According to Marc Housieaux, it should not require that much paperwork and be this time-consuming. Hence the (crying) need for automated solutions, to optimize processes while still preventing the risk of fraud. 

We have been talking here and there about the disintermediation of financial services for a couple of years, but where are we standing now? 

According to KPMG Head of Fund Distribution Services and Digital Ledger Services Said Fihri, although desintermediation and cryptocurrencies are a natural change the financial industry is facing, it will still take time – especially from a compliance perspective.

An opinion Regulatory CA Indosuez Wealth (Europe) Deputy COO Francisco García Moyano could not agree more: “Traditional institutions are lagging behind and not yet able to cope with new technologies. […] Now that banks are willing to collaborate with FinTechs, they are wondering in which regulatory framework – which is very much missing today. […]”

But as Gilbert Fridgen wondered, “if something is not regulated, why does it mean we cannot do it? […] If you talk to regulators, they will check what the industry wants before discussing anything, while the industry is waiting for regulators to set a clear framework before making any move.”. Isn’t Europe bold enough?

According to Jean Rognetta, “although the necessity to regulate crypto is patent, it won’t happen any time soon. If you take American politics, the Democrats can’t agree on a common position, neither can the Republicans. […] Not to mention the lobbying from the few remaining crypto platforms to go to CFTC because they believe it’s going to be more lenient. So, there is no regulation that is going to come out.”