Fintech is exploding.

It is a global industry, striving to change the future of finance.

…And the future is now. At Kurtosys, we’ve set out to cover exactly what’s happening in the financial industry the world over, one country at a time. With so many places contributing to the advancement of our digital world, each deserves their own time in the spotlight.

For this episode, we’re homing in on Luxembourg: tiny country, financial powerhouse. Read on to discover how this little rascal is making a huge mark on both the European and global fintech scenes, pulling financial technology companies from all over the world into its well-established tractor beam.


For regular readers of The Fintech World Series (who are currently scratching their heads I’m sure), firstly, thank you! Secondly, sorry! All of those promises about keeping it alphabetical have swiftly gone out of the window. It’s not good for my mild OCD either, but tough luck. I felt a bit spontaneous this time around.

Not a country to be outdone, Luxembourg is the only Grand Duchy in the world and has the highest GDP per capita on the globe too. That first statement is a bit of a lie, though. As amazing as the achievement of winning the Eurovision Song Contest FIVE TIMES is, unfortunately they have been beaten to the number one and two slots by Ireland and Sweden respectively. Sorry, Luxembourg. What on earth was that ‘Papa Pingouin’ entry from 1980? Unbelievable. Nevertheless, the country still boasts extreme natural beauty, with more than a third of it covered in dense forest, and the Mullerthal region is often called “Little Switzerland” for its impressive landscape. You should give it a visit.

On top of these are the incredible facts about Luxembourg’s position in the financial sector, and that’s what we’re all here for, so let’s get to it.

Luxembourg fintech infographic

Luxembourg List (of financial things)

I hope you’re a fan of lists. Here are some impressive statistics from an April 2016 report of Lux Fintech from PWC:

  • Luxembourg accommodates 144 banks from 28 countries.
  • There are 9 payments and 5 e-money institutions in the private sector.
  • The number of these institutions tripled between 2012 and 2015.
  • It is home to 94 insurance companies…
  • …And more than 50 private equity firms, 9 of which are from ‘world top 10’ companies.
  • Over 800 fund promoters from over 50 countries have domiciled funds in Luxembourg.
  • The Luxembourg Stock Exchange is the world leader in international bond listing, with 40,000 tradable securities from over 100 countries in over 50 different currencies.
  • Many tech and e-commerce big dogs use the country as a top business location, including Amazon Payments, eBay, PayPal and Rakuten.
  • Luxembourg holds €3.36 trillion AUM (Feb 2016) which ranks it number one in the EU, and second globally after the US.

That’s not the end. Deloitte Boost (an incubator), lists some more fascinating facts about the fintech landscape:

  • Luxembourg is defined as the “most competitive” country in the EU, and 6th “most competitive” worldwide.
  • It is Europe’s number 1 investment fund centre.
  • In terms of global innovation, it is ranked 9th out of a possible 141.
  • It is a Top 2 EU financial centre.
  • 70% of EU wealth is located within a 700km radius.
  • It has the EU’s lowest rate of VAT.
  • Luxembourg is home to 20 Top Tier data centres, with around 500,000m² of available floor space.
  • It’s 70,000 GBPS capacity makes for fast and reliable internet connection.

The PWC report also surveyed 544 respondents from 46 countries. 94% of respondents from a “traditional” financial industry background believed themselves to be at risk from fintech companies. The Head of Innovation at one of Luxembourg’s largest banks, however, claims that “FinTech will complement banking services, but it will not fully replace them.” Indeed, the implementation of blockchain solutions is estimated by Santander to reduce banks’ infrastructural costs by up to US$20 billion globally by 2022. 60% of those surveyed recognise the importance of blockchain, but only 17% consider themselves “very familiar with it”. Despite being high on the agenda in Luxembourg, it is still a relatively new concept. For 44% of financial sector players, fintech is already integrated into their corporate strategies, yet more than 50% are either lacking a ‘fintech strategy’, or do not have one on their immediate horizon at all.

Lux-cows

Rules & Regulations

In a report entitled The Fintech Landscape in Luxembourg, Pascal Denis (a partner at KPMG Luxembourg) notes that:

The reason why these [leading payment and e-commerce] companies come to Luxembourg is because they want a foothold in Europe from where they can, in a regulated manner, develop their activities in multiple countries. Luxembourg has strict regulatory authorities, who are open-minded to innovation. Just to give you an example, the Luxembourg financial regulator, the CSSF (Commission de Surveillance du Secteur Financier) was the first supervisory authority in Europe to take an official position on virtual currencies, defining them as scriptural money [which are funds held in the current accounts of commercial banks]. Importantly, the CSSF stressed that financial activities involving virtual currencies (whether payment services or trading platforms) will need to be regulated.”

With strict, and dedicated, financial regulations for start-ups, Frédéric Becker’s (Head of Start-up Support at incubator Luxinnovation) insistence that “making the bridge between public and private financing is of crucial importance at such an early stage of a company’s lifecycle” will be more easily achieved. Indeed, you should check out the whole of this comprehensive report, which contains interviews with representatives from banks such as KPMG and BNP Paribas, as well as the CEO of Technoport, a Co-founder of Digicash and the Director of MangoPay, all of which will be discussed in due course. Funding and regulatory structures in Luxembourg will surely boost the fintech startup scene.

Here’s some more info. Set up by the government and private investors, the Luxembourg Seed Fund provides financial support for the development of start-ups for up to seven years of age in the field of digital economy. On top of this is the introduction of the “Digital Lëtzebuerg” national initiative by the Ministry of the Economy, which includes the Digital Tech Fund, managed by Luxembourg-based Expon Capital. Its aim is to invest in promising projects focusing on Internet of Things, cybersecurity, fintech, big data and more. Also, the Luxembourg Future Fund is a €150m fund set up to “stimulate the diversification and sustainable development of the Luxembourgish economy” by the European Investment Fund (EIF) and the Société Nationale de Crédit et d’Investissement (SNCI). It will also invest in innovative SMEs and venture capital funds. Very promising.

So how’s the current fintech landscape looking in Lux? According to multiple reports from Deloitte: pretty well. Pretty well indeed.

Fintech Rundown

In Deloitte’s all-encompassing ‘Connecting Global FinTech: Hub Review’ from September 2016, which you can see in full here, it is outlined that Luxembourg is home to an impressive 150 fintech companies, employing around 100,000 people. Furthermore, it describes the supportive nature of the government (building on the earlier section), due to its regulations that have been specified for the financial services sector, and their extensive R&D (research and development) grants.

There are a number of significant investors dedicated to supporting early-stage fintech startups, which include:

  • The aforementioned SNCI.
  • Chameleon Invest, who provide capital and know-how to budding entrepreneurs and look to attract talent to Luxembourg by building a sustainable hotspot. They also manage high-potential start-up companies.
  • Docler Holdings, who are based in the fast-developing business area of Kirchberg.
  • The Luxembourg Business Angel Network (LBAN) is a non-profit organisation, with links to the government in order to fully support early-stage players. It is supported by the Luxembourg Chamber of Commerce.
  • 360 Capital has had over €300m under management in the last 15 years and invests in disruptive digital and technology companies, from €300,000 to €5m.
  • Saphir is a private equity and corporate finance advisor.

Grand-Duke-Lux

Another Deloitte article explains the benefits of living and establishing a business in Luxembourg. Ultimately, the country’s private banking industry in the biggest in the Eurozone, and greater innovation across all sectors is achieved through the use of ‘Luxembourg Clusters’, containing experts from private and public sectors. Specifically of interest for the fintech sector is the ‘ICT Cluster’.

Deloitte’s ‘Deloitte Digital’ network has also recently included Luxembourg into its membership, as reported by ICT Spring. As outlined, “The Deloitte Digital standard offering focuses on the area of Digital Strategy, Digital Marketing, Digital Operation, Analytics, and Cybersecurity.” Going one step further (classic Luxembourg), Deloitte Digital Luxembourg also focuses on disruptive fintech sectors including the following: Blockchain; Regulatory Technologies; Roboadvisors; Digital Identity; IoT; Machine Learning; Artificial Intelligence; and Robo-Process Automation. The firm attempts to assist their clients in understanding the latest innovations in the financial industry, particularly those based in disruptive technologies, by running labs, workshops, hackathons, acceleration programs etc. Deloitte Luxembourg also helped to found ‘the Grid’, a taskforce based within the Deloitte network to deliver disruptive solutions to clients. Additionally, Rubix is a Blockchain testing and building service, designed to be a “fully functional private network” that can be changed according to the needs of different organisations.

Phew, it’s evident that Deloitte are truly attempting to take full advantage of Lux’s fintech potential.

Incubating talent… in incubators

If you thought that the Deloitte-related chat ended there…

As if the Lux fintech scene wasn’t already a tour-de-force, multiple incubators and accelerators act as the nurturing part of the ever-growing fintech family. One of these is the aforementioned Deloitte Boost, a service which helps startups launch and grow. Deloitte Boost offers the following services for promising startups:

Incorporation: It is partnered with a law firm for business license applications and assists with payroll and tax structure.

Licensing: Advice for license selection, application and implementation.

HR: Offers support in operations, training and recruitment.

R&D Subsidies: Involves application for funding programs, contracts and grants with funding authorities and compliance.

Finance: Valuation reviews, the writing and reviewing of business plans, attracting investors and CFO support.

Accounting: Account maintenance, approval of board and shareholders’ annual accounts and VAT compliance.

Growth: Supporting business and marketing strategy, technology, operations and security. Startups gain access to Deloitte’s global ecosystem.

Amongst Luxembourg’s vast array of incubators, here are more of note:

BGI Lux Future Lab – A self-proclaimed “powerful community” situated in Luxembourg and abroad. It hosts around 30 startups, and is part of the BNP Paribas startup network.

The KHUBE – KPMG’s incubator, whose mission is to bring together all sectors of the fintech ecosystem.

Luxembourg House of Financial Technology (LHoFT) – A startup incubator with co-working spaces which “creates value for the entire Luxembourg Fintech ecosystem”. It focuses on payments, AI for FinServ, security and blockchain for the fund industry. As you can see from the link, they also have a pretty swanky-looking website.

Luxinnovation – As well as being the main catalyst behind the ‘Lux Cluster’ initiative, in 2014 this accelerator supported nearly 300 projects and helped to establish 45 new start-ups. Most are active in the fields of e-payments, e-invoicing, cryptocurrency and big data.

Nyuko – Providing training, support, co-working space and a GO Social contest, Nyuko has supported over 400 projects and raised €4m for startups with the help of more than 500 experts. It is partnered by Luxembourg Open Innovation Club (LOIC) to join together startups and corporates.

Technoport – Founded in June 2012, it runs three different platforms: an incubator, a fab lab in Belval (which means ‘fabrication laboratory’, an open prototyping platform), and a co-working space which hosts 25 companies on average. A third of those companies that have left the incubator have been acquired by foreign companies.

mullerthal-lux

Finally (!), we have a list of successful Lux startups for you to peruse:

Birdee – Birdee Institutional was created by Gambit Financial Institutions, founded by Geoffroy de Schrevel. It is a robo-advisor and a suite of portfolio management applications for investors. 

Bitstamp – The first fully licensed bitcoin exchange platform. You can buy bitcoins using a credit/debit card. Founded in 2011 by Damijan Merlak and Nejc Kodrič (CEO). Its European centre is situated in Luxembourg.

Digicash – Founded in 2010, it is a holistic mobile payments app in which you can pay for groceries, transfer money to individuals, pay bills, and make online purchases. It can be used in certain outlets (like Subway!) 

Fundsquare – A subsidiary of the Luxembourg Stock Exchange, it is a fund market utility which offers an infrastructure to improve operations for fund promoters, buyers and service providers.

Mangopay – An online and mobile third party payments platform, where you can create e-wallets to hold funds securely. It offers a multi-currency payment flow for marketspaces, crowdfunding and sharing economies. Founded in 2012 as a subsidiary of Leetchi Group found by Céline Lazorthes.

Neuroprofiler – A risk profiler for financial advisors, its checks compliancy with MiFID II and can assign clients to possible profiles based on a behavioural finance algorithm. It is a first in KYC (Know Your Customer) behavioural data processing.

Scorechain – Founded in 2015 by Pierre Gerard, Scorechain builds tools to boost trust in the Bitcoin/blockchain ecosystem. It’s compliance solution provides market data and analysis for transaction stakeholders. It plans to create tools for digital asset management.

So there you go. If you’ve made it all the way here to the finish line, give yourself a pat on the back. Luxembourg is an absolute monster in the financial sector, as you can well see. More to come from the Grand Duchy I’m sure.

If you have any thoughts about fintech in Luxembourg, let us know in the comments below, or you can tweet us.

Check back soon for more instalments of The Fintech World Series!

Elliot Burr

Elliot Burr

Content Marketing Editor at Kurtosys
Fervently chatting about the future of FinTech.
Elliot Burr

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