October’s meeting of Luxembourg’s main financial sector think tank, the Haut Comité de la Place Financière, called for reform of rules related to financial sector outsourcing. This meeting of around 40 representatives of the IT sector, the banking industry, the government, regulators, lawyers, consultants, and more decided that the rules around support PSFs need to be updated. Principally this impulse is driven by a desire to embrace the opportunities offered by the second payment services directive (PSD2) which came into force on 14th September.
Reforming support PSF rules
“Our association is to lead this project, and we have a deadline of the end of 2020 to get back to the Haut Comité with the results of our work,” Jean-François Terminaux the chairman of FTL told the association’s annual conference on 14th November at BIL’s headquarters, route d’Esch. This represents a major responsibility for this relatively young grouping, which has become the national interlocutor for fintech players. He invited more firms to join, reminding the audience that a year’s free membership is offered to fintech firms.
Pierre Gramegna, the finance minister, was the main keynote speaker, and he underlined his support to the association and the PSF reform initiative. “Good regulation can become a powerful tool, and PDS2 is sophisticated and puts Europe ahead of others,” he said. He believes it is a myth that all tech firms are opposed to regulation, with many finding it beneficial to work with supervisors to offer comfort to clients.
China has made great strides in moving towards a cashless society, with the payments services of WeChat and Alipay leading the way. However, Mr Gramegna pointed out that European citizens’ desire to protect their private lives through GDPR presents a significant challenge to the payments industry. “We should see what’s happening in China as a wake-up call,” he noted. Although Chinese systems are not appropriate for the EU market, they are building world-leading technology and expertise. When ways are found to streamline GDPR processes, Chinese firms will be in pole position to take advantage he suggested.
“We are in listening mode, and will build on EU legislation where we can,” Mr Gramegna added. For example, he pointed to the law change earlier this year to ensure that digital transactions and contracts have the same legal validity as traditional modes. He added that the CSSF aims to facilitate innovation where it can, and find ways to help firms become compliant.
Open to PSD2 opportunities
Speeches and a roundtable discussion followed to illuminate how global and local players are addressing the challenge of open banking. Nathalie Knops, Head of Business Transformation at BIL said their early strategy was about growing institutional knowledge in order to enable the firm to embrace interesting innnovation. “At the moment we don’t know what kind of revenues these technologies will create, or whether this will be principally about customer retention,” she said.
Lu Shuai, co-CEO, of the Luxembourg-based Chinese payments firm Ping Pong Europe offered support to the view that long-term commitment is required. For example, looking at peer to peer services operated by banks, he said these “have been very slow to monetise as they charge zero percent for the service.” However he saw PDS2 as a great opportunity to breakdown barriers, whether the goal is boosting user experience, generating new revenue streams or both.