Luxembourg – a Place for the Future
nnovation doesn’t only happen in London. We’ve checked. TFT had a catch up with Nasir Zubairi, the CEO of the LHoFT – Luxembourg House of Financial Technology, on fintech innovation, how a country can be a startup, and how banks are doomed… Or almost. Read on.
Profile: Nasir Zubairi (CEO, The LHoFT Foundation)
Birthplace: London, UK
Book: “How to Win Friends and Influence People” by Dale Carnegie.
Film: American History X
Restaurant: Ali Baba, 46th and 2nd, Manhattan, NY
Philosophy: Live and Learn
TFT: So, how was LHoFT formed, and what is the idea behind it?
Nasir: It was officially incorporated as a foundation in April 2017. It was essentially driven by the Minister of Finance, Pierre Gramegna, who was putting together Luxembourg’s strategy around fintech. It’s partly government funded, partly by the private sector. It’s a not-for-profit public/private foundation.
TFT: What’s its business purpose? Does it serve the interests of businesses in Luxembourg, or is it just a government initiative to attract more fintechs?
Nasir: Well, attracting fintechs is, I guess, an intangible output. But ultimately, the core mission of the LHoFT is to ensure the competitiveness of Luxembourg’s financial services with the key focus on technology. One initiative is around ecosystem development: bringing together various participants within the fintech ecosystem of Luxembourg and connecting them.
The other strategic focus is on the marriage between traditional finance and the fintech sector. We’re looking after traditional institutions, helping them in their digitalisation. When we go around the world, we find fintech firms that look interesting and could solve current problems financial companies we know are facing. We then help them connect and move towards collaboration. So, to answer your question, we don’t try and drag people to Luxembourg, that’s not our job. Our job is really to find solutions and help finance to move forward.
TFT: What do you consider the greatest achievements of LHoFT so far?
Nasir: Putting Luxembourg on the map. We moved into our current space and filled it up very quickly, seeing a huge increase in demand from firms wanting to come to Luxembourg or more importantly, work with Luxembourg. I think the interest that we receive from increasingly larger and more prominent fintech firms signifies that we have succeeded. By the way, in recent months Alipay chose Luxembourg as their EU headquarters. That’s a great achievement for us.
TFT: What is it about Luxembourg that is so attractive?
Nasir: We have 7 of the world’s 52 Tier 4 data centres in Europe here now. We have, I believe, the fastest internet in Europe already, and they are currently installing more fibre networks. Data and connectivity are big elements of making sure that we have the core infrastructure to be digitalised.
Sustainability is also a core theme in our financial services sector. The stock exchange in Luxembourg is the biggest green exchange in the world, it has the majority of the world’s green bonds to finance sustainable initiatives.
SUSTAINABILITY IS ALSO A CORE THEME IN OUR FINANCIAL SERVICES SECTOR.
Luxembourg’s space engine is moving ahead fast. A lot of firms are coming up in that space, and in satellites we are already a European leader anyway. 6% of our GDP now comes from space and it is growing very, very fast. We see this as a big industry and a big part of the future. Another specific element of it is space mining – mining for minerals in space. We had the US Commerce Secretary, Wilbert Roche, here over the weekend signing an agreement with the Deputy Prime Minister.
TFT: It’s all very futuristic when it comes to Luxembourg, isn’t it?
Nasir: As I said we’re small, so like startup we have agility. Things can move here quite quickly.
TFT: What’s in your opinion will be the impact of AI technology of Finance?
Nasir: Within 1-2 years, nothing will change. It’s still early days. In 5 years, I think we will begin to see quite a lot of robot process automation and first level AI. A removal of human interactions and efficiency of processes, potentially. I think there’s acute pain from regulation and compliance for traditional institutions. AI can help solve that pain. The thing is, banks don’t move that quickly, they typically have a procurement process of 2,5 or 3 years. That means that they’d have to be looking at these things now to have them out and making an impact in 3 years.
TFT: So, what’s the future for banks?
Nasir: The economy in Europe is faltering, banks are starting to shed jobs which is often an indicator that we are about to go into recession. That’s a big red flag, they need to save money, most of them have a return on equity between 4-8% which is absolutely diabolical. Cost management is their focus, so if AI and machine learning is implemented, it would be around automation and better management in compliance. The banks in Europe are in trouble. Negative interest rates are killing them, inefficiency and the increasing cost of compliance are killing them, they’re not able to keep up with it all. It’s not all their own fault, current EU regulatory and monetary policy could seriously damage banking in Europe.
THE ECONOMY IN EUROPE IS FALTERING, BANKS ARE STARTING TO SHED JOBS WHICH IS OFTEN AN INDICATOR THAT WE ARE ABOUT TO GO INTO RECESSION.
TFT: How can it be improved?
Nasir: No matter how much experts scream, banks just don’t suddenly start to do things very differently. The way we look at it, is how can we deploy some speed boats near the oil tanker to help it move faster. Things like helping them be more agile with their procurement processes so that they can integrate new technologies faster. Also, education around project management methodologies and innovation process… and hiring the right talent: quite often banks are taking somebody internally, who has been a banker all their lives, as the head of innovation. What the hell does that person know about innovation? Of course, it doesn’t work!
NO MATTER HOW MUCH EXPERTS SCREAM, BANKS JUST DON’T SUDDENLY START TO DO THINGS VERY DIFFERENTLY.
TFT: Anything exciting you’d like to announce?
Nasir: The Global Venture Summit, which will take place in November this year, will be quite a unique event. There are a lot of “same old, same old” events all over Europe. This one’s different because the point of the summit is bringing a large number of very prominent US-based VCs over to Europe with the aim to invest. In fact, they will look to create a syndicated fund prior to the event. There are going to be about 60 to 70 notable VCs, around 30 billion in AUM, and some outstanding speakers. They want to meet with their European peers and get to know them, but also, critically, meet the best and the brightest of European startups. It will be quite a large event and I’m looking forward to having the European community coming to Luxembourg as well.
TFT: What’s your personal story? How did you end up working for LHoFT and running it?
Nasir: Part of the reason I moved here was because I saw a tremendous opportunity in fintech. But the core reason for me is that we have people from all over the world running banks and financial institutions in Luxembourg. No matter where they came from, somewhere in the conversation they would say, “Let’s do something great for Luxembourg.” I saw that loyalty and belief that they could contribute to changing and developing a country as an incredibly powerful tool for change. There’s a sense of belief in Luxembourg, given that it’s a small place, that you can change a country. And people, no matter where they’ve come from, including myself, work to that objective. If you think about it from a personal legacy perspective, i.e. what you leave behind on this planet, to be remembered for having helped change or develop a country is pretty damn cool, right?