Nasir Zubairi, CEO, says LHoFT rapidly adapted to the pandemic using digital platforms to support its own activities while also rising to the challenge of meeting the digital needs of banks in the spheres of regtech and payments.
What have been the main developments of the LHoFT in 2020?
The main development in 2020 was our Digital connectivity and distribution strategy. The LHoFT was fast in responding to the pandemic, switching to a digital platform. We focused on marketing, events, content and support activities via the internet through webinars, seminars and workshops. We set up a professional studio at our facility to be best in class when it comes to web content delivery. We also launched the LHoFT App last week. The App will become central to content delivery and brand development locally and internationally over the coming years. Once you are connected you choose from broad sectoral categories. then, via IBM Watson using artificial intelligence, it learns through your behaviors to tailor content for you.
Can you describe the Luxembourg fintech success stories in 2020?
Luxembourg fintech benefitted in areas where we are strong: regtech and payments. The Covid-19 pandemic forced banks to focus on business continuity with their people working remotely and communicating digitally. There was a realization of regtech’s importance when banks could not get signatures or verify KYC details or hold board meetings, so they looked to digital signatures, documents and meetings. Those businesses within our membership have done very well. Lockdowns forced people to resort to electronic payments , and electronic transaction volumes surged. The LHoFT has ended the year with more members and residents than we started, be it that most are still working remotely.
What trends do you see emerging for 2021?
We expect a continuation of the trends we saw this year with financial institutions focusing on cost savings and efficiency to drive productivity. These are likely to create opportunities in the regtech sector. This will include technologies like artificial intelligence and big data as well as the continued acceleration of tokenization and blockchain. tokensisation lowers issuing costs of securities,which, in particular, could have benefits for the growing focus on ESG and green finance because there are considerable additional costs to issuing green securities. These arise as a result of all the reporting requirements, so if we can drive down the overall costs it should make green securities more interesting. We are also starting to see tokenization in the fund sector and real estate. I think we'll start seeing some private equity issues as well.
Quotation: “Luxembourg fintech benefitted in areas where we are strong: regtech and payments.”
Nasir Zubairi, CEO, LHoFT
Nasir Zubairi (LHoFT): Raising the Roof for ESG Investing
In an ESG2 Financial Square conversation, Nasir Zubairi, CEO of the LHoFT, discusses with Niccolo Polli, CEO, HSBC Luxembourg, what role fintechs can play in the development of an ESG investment environment.
In the context of ESG and sustainable finance, what is the role of the LHoFT and fintechs in creating a favorable investment environment?
At LHoFT we see technology as an enabler for financial services and, increasingly, people see its value through fintechs supporting ESG and sustainable finance. With all the rules and reporting requirements for these activities, we see a green field for financial technology to enable the sector to be effective and efficient. We are already seeing the application of tokenization in the issuance of green bonds. We are also seeing their use in the creation of carbon-neutral credits for new bank accounts that are being opened at certain fintech neo banks in the US. We see a key component of the LHoFT’s role and future as concentrating on the broad ecosystem as Luxembourg emphasizes ESG and sustainable finance in its growth and activity.
Are there particular activities in which fintechs can contribute?
The new EU regulatory requirements being put in place for ESG and green investing has created an opportunity for regtech applications. We see a number of interesting start-ups emerging to provide efficient technologies and tools to enable institutions to comply. I have already held valuable discussions with a number of financial services players. Another activity that is creating great opportunities is in the investment fund industry where firms are seeking indexes or benchmarks to help measure the impact and effectiveness of investing in different green initiatives. For example, one company is creating metrics around the impact investments have on different equities and assets so the effects can be built into financial models to allow better understanding about the source of returns.
What would be your message to the typical traditional firms, like banks and funds in terms of working with fintechs?
The banks and funds can marry their economies of scale and their skill set in financial products with the agility, ingenuity and creativity of fintech start-ups. That way they can offer better solutions to their clients. When we talk about the issuance of green bonds, for example, there is hesitancy sometimes from firms. That is principally because the costs are going to be higher with all the new reporting requirements. However, nowadays you can use tokenization to help reduce the expenses of the initial part of an issue and maybe set a foundation and a framework to integrate technology for future issuance. As new tools arrive, you're going to make that product more attractive. So, I think working together and recognizing each other's strengths will ultimately lead to a better market and a better industry.
Quotation: “The banks and funds can marry their economies of scale and their skill set in financial products with the agility, ingenuity and creativity of fintech start-ups.”
Nasir Zubairi, CEO, LHoFT,