Supporting Collateral Management Transformation
Post-crisis regulations – such as the European Market Infrastructure Regulation (EMIR) or the Uncleared Margin Rules (UMR) – have driven significant changes in the financial market, increasing collateral needs for financial institutions. So how technology is going to play a key role in collateral management transformation?
VERMEG Head of Markets Innovation Michael Carignano further explained the impact of updating collateral management systems for both Central Counterparty Clearing Houses (CCPs) and Central Banks: while it will enable the first to better manage collateral liquidity, it will allow the second to ensure sufficient liquidity is available on financial markets.
Reshaping the payments ecosystem
All over the world, tech-savvy consumers increasingly adopt new forms of payment, from contactless to mobile solutions that are faster and more convenient – transactions that once took days are now completed in the blink of an eye. However, many banks and financial services institutions still struggle to fulfill consumers’ expectations.
According to eBay Payments Europe Managing Director and General Manager Michael Pechner, considering all the data banks manage and the tremendous opportunity they had to harness this data, “they really missed the trick” – leaving the lion’s share to American Giants like Google and Apple, which quickly understood how to use data to drive customer experience. An observation Visa Vice-President & Head of Processor Partnerships for the Europe and CEMEA regions Joe Samuel could not agree more: for him, opportunities and challenges rely on a “customer-centric approach and solid data privacy and security principles” – using tokens for instance.
Next on stage, LUXHUB CEO Jacques Pütz. According to him, if the financial services industry truly wants to improve service quality and customers’ journey, it should combine open banking – whose usage is significantly increasing in Luxembourg, with over two million API monthly calls – to instant payments – particularly useful for e-commerce payments, funds transfer or high transaction volumes for instance.
ICT Spring was also the opportunity for Jacques to officially announce LUXHUB Trusted Corporate Pay, offered by partner banks Post, Spuerkeess, BGL BNP Paribas, Raiffeisen and BIL (from 2023). But for which purpose? Jacques gave a simple example: “Let’s imagine you book a flight with a travel agency but you need to cancel it and want to be refunded. You will receive your money in a few seconds.” This new interface is operational 24/7 all year round and no authorization process is required.
B2B payments – the digital laggards?
Focusing now on the corporate side, Finologee CEO & Co-Founder Raoul Mulheims moderated a roundtable with Isabel Group CEO Jean De Crane, SWIFT Head of Benelux Thomas Peeters and Partelya Consulting Director of Studies, Prospective and Training Andrea Toucinho.
According to Jean, “despite the demand on leveraging the novelties proposed by open banking institutions, in terms of development, we saw a hard focus on retail payments and use cases”. Some work still needs to be done on APIs.
Thomas insisted on the different approach of corporates and SMEs. “Unlike what we may expect, the innovation of SMEs is more at the back to better drive it at the front – especially by offering more transparency, faster payments and less friction in the cross-border space.”
Focusing on Luxembourg now, according to Andrea, “it will be interesting to work on the next steps of open finance, since the country has a good level of maturity in the field with the LUXHUB initiative, and on the request to pay, since it is a strong asset in a B2B context to foster digitalisation across Europe.”
Dealing with the KYC challenge within the insurance sector
Looking at all the sectors in financial services, insurance is probably towards the bottom end in terms of digitalisation – which has always surprised the Luxembourg House of Financial Technology CEO Nasir Zubairi given that “insurance companies are by definition data businesses and yet they don’t seem to be too advanced in actually using that data beyond simply trying to work at risk”.
An interesting observation that led Nasir and Finologee CEO & Co-Founder Jonathan Prince to wonder if a centralized repository of KYC – within a certain time frame – shared by all the companies a client deals with might be a good way to go in Luxembourg.
Defining a new approach for financial services
Covid-19 has inevitably changed our habits, both from a personal and professional perspective – technology has empowered flexibility and now plays a key role in management. As Zoom CIO Advisor Magnus Falk underlined, “managers shouldn’t make rules for rules sake, but rather give flexibility to their teams and encourage interaction”. A reasoning that also applies to customers, whose remote interactions with banks should be “as good as in person”.
Web3 Foundation COO Bertrand Perez then introduced Web 3.0, which will undoubtedly become a central component of the financial services industry in the coming years, by enabling customers to not only access their personal information but also own it (through tokens) – “Web 3.0 is about giving users the opportunity to regain sovereignty over their personal information and make decisions based on the truth rather than on trust.”
Which opportunities and threats around cryptocurrencies?
MiddleGame Ventures Co-Founder & Managing Partner Pascal Bouvier started the ball rolling with a challenging question: “Over 15 years ago, there was a first wave of innovation, when everyone thought FinTech startups would take over traditional banks, and later on a second one, with the rise of super apps. So, why should we believe that the crypto movement innovation is going to reinvent financial services given that we have at least two waves of innovation that were not able to do so?”
For Coinhouse Group CEO & Co-Founder Nicolas Louvet, crypto assets have nothing to do with just a trend but rather with a true mean to solve existing needs, such as “how do we accelerate financial inclusion in less developed countries, how do we bring new value to a system shared by a large quantity of people without any central bank or government control?”.
But according to Nicolas, “here in Europe, we don’t really see the interest in crypto since we have strong currencies” – although it could generate new kinds of revenues. So, for the market to grow, Nicolas hopes that European institutions will soon get up to speed and work on a legal framework.
An observation Open Warfare CEO Sacha Waedemon couldn’t agree more. In Europe, we haven’t seen the impact of crypto-assets on taxation yet. “We can easily imagine that it will be huge, leading people earning a lot of money from these assets to go away – to Switzerland, Singapore or Dubai. So, I hope regulators will take that into account if they don’t want Europe to lose its attractiveness”.
Luxembourg Times Editor-in-Chief Douwe Miedema then asked Non/Executive Director and Senior Advisor in FinTech/VC Solenne Niedercorn-Desouches about the recent crypto meltdown. Although she is convinced it will go up again in the coming months – like any cyclical market trend – “these shocks are always a good opportunity for banks and investment funds to review the risk approach”.
Creative and strategic insights – followed by young and yet promising startups’ pitches (CYBAVO, SWAPay and Finqware) – that will undoubtedly contribute to the FinTech evolution.