Finologee at the ICT Spring 2021: A recap

Hosted by Jonathan Prince, Finologee’s co-founder and CSO

The mobile payment landscape in Luxembourg has been developing rapidly over the past ten years. According to the 2021 publication Key Players in the European Payments Landscape by the Emerging Payments Association EU (EPA EU) and The Paypers, by 2019 3.7 billion electronic payment transactions were made through mobile (51%), followed by card payments with 31%. Nowadays, Digicash by Payconiq is the most used mobile payment application in Luxembourg with over 245,000 , and in August 2021, it reached a total amount of transactions processed of €1 billion (exclusively by Luxembourg retail bank customers).

Jonathan Prince took the stage at the Fintech Summit together with Stijn van Brussel, COO of Payconiq, Serge Wagener, Vice President & Head of Business Unit Payments at Spuerkeess and Sofiane Hémici, Head of Enabling Functions, RegTech, Core Banking & Payments Strategic Initiatives at Banque Raiffeisen, to discuss what led to the creation of this Luxembourg-made app, the past and current challenges, its success, and the vision of mobile payments in the future. 

Going 10 years back in time, the opportunities in mobile payments for banks were limited, but existent. They included the possibility for a bank to launch its own wallet, its own cards or bank account-linked m-payment product using credit transfers, to join forces with other banks to develop a common solution or even to launch its own in-house app. Serge Wagener explained “At Spuerkeess, we knew we wanted to take a leap in the direction of mobile payments but we were not entirely sure how to go about it. And then you [the Digicash founders] came along with a proposal which fitted with the vision and needs of the bank. The result was the successful launch of the very first Digicash App, and we all know how that turned out.”

“Digicash crossed the €1 billion mark in August 2021”

Returning to the present, the discussion took a turn towards the question if a bank is able to establish a standard or start its own trend. As the S-Digicash app proved, while it might take time for the app to be used by customers, the rise in popularity encouraged other banks in Luxembourg to take on the trend, to go for their mobile payment apps. linked to bank accounts instead of betting on an e-wallet strategy (using e-money accounts) with a need to top-up through credit card or credit transfers. All this under the same Digicash umbrella brand and payment scheme. Sofiane Hémici took up the microphone saying, “As the representative of the latest bank to join the Digicash by Payconiq ecosystem, I can confirm that yes, a bank can create a trend. As we have witnessed with the success of this mobile payment app, not only banks jumped in, but there actually was – and still is – a very high customer demand for this kind of product. In Raiffeisen’s case, we realised that to better serve our clients and to answer to their needs, we had to take that step forward. I imagine that for all the banks that already have an in-house app, the motivations ran more or less in the same lines, along with the objective to stay ahead in this digital age and boost our customers’ experiences.”

As the panel discussion came to a close, the conversation turned towards the future. Stijn van Brussel, COO of Payconiq shared his experience in the mobile payments field, diving into the merge between Digicash and Payconiq and how the long-term objective is to grow beyond the borders of the Benelux countries. “Back in 2017, Payconiq was already a European payment initiative with substantial activities in Belgium and the Netherlands. However, we wanted to establish ourselves in other markets. We studied the contexts of our neighboring countries and discovered Digicash in Luxembourg. With the acquision of Digicash, Payconiq took an important step in its objective to build one of the most advanced mobile payments setups in Europe. As we continue to partner with additional players and get them on board in both our current and in other markets, we will be able to accelerate our growth throughout Europe.”

When Jonathan Prince asked what advice Stijn Van Brussel could give when it came to how to scale a local business to the international market, the COO of Payconiq answered, “It’s all about looking around and not being afraid of expanding, of creating new business relationships outside ones’ own borders.”

Hosted by Raoul Mulheims, Finologee’s cofounder and CEO

With the fight against money laundering growing more important in the past few years, it came with no surprise that the 5^th AML directive came to change the game up once again. With the directive being transposed into national law, national regulators have adapted their regulations that update the framework and change some of the rules, but also introduce new opportunities and additional flexibility for Luxembourg-regulated entities. Some of these changes include:

• Risk-based approach has become the norm
• Customer due diligence measures, changes at acceptance level through automation for the identification
• Additional clarification on simplified and enhanced due diligence, relationships with PEPs
• Due diligence requirements, further strengthening the ones now in place
• Outsourcing requirements and governance requirements

Our co-founder and CEO Raoul Mulheims sat down with Glenn Meyer, Lawyer and Partner at Arendt & Medernach, Pascal Bughin, Chief Operations & Compliance Officer at La Mondiale Europartner, and Max Braun, the Head of the Luxembourg FIU, and opened the panel discussion by asking them how institutions can best deal with these changes and how to make the best of them.  

The discussion continued to the crucial role of digital strategies as enhancers and change-drivers at the different business levels for financial industry players. Meyer took the floor, explaining that “digitalisation processes are easier to implement where data is standardised, and there is a challenge when facing non-standardised data structure and areas.” According to him, one of the most common challenges in AML/CFT regulation is that rules are very often more about defining goals and less so about the means. This approach ultimately leads to the questioning and hesitation of industry players. Finally, Meyer concluded that one of the risks for financial industry-regulated players is that they might sometimes end up with a higher risk of exposure if they choose to carry out thorough analyses and increase the quality of declarations, instead of applying the “standard” declaration procedure.

“Digitalisation cannot replace common sense in AML/CFT.”

To close the panel discussion, the CEO of Finologee asked his guest speakers what are, according to them and their experience, the best practices and the advice they can offer newly joined market players.

“In my opinion, digitalisation cannot replace common sense. Financial industry players and their compliance teams should use their common sense as often as possible. For players dealing with higher transaction volumes: thorough data analysis tools and processes can substantially increase the detection quality and relevance. My advice: take care of your declarations and focus on increasing the quality” said Max Braun.

Glenn Meyer continued, “My advice is twofold: for wealth managers and private banks, run analyses on the data that you have, and truly follow-up on what your clients are actually doing with their money. For new generation players and neo-banks, focus on and increase the quality on the documents and the data you retrieve from your onboarding process. Finally, for all the players, I’d recommend investing time into getting to know regulation and take time to master it. It’s complex, but it’s essential.”

Pascal Bughin concluded, “There is no magic tool out there. Players need to learn how to use digital tools pragmatically, for what they have to offer. Wisely employed, these tools can help significantly in the retrieval of data and file updates but also boost customer experience. However, it’s important to note that no technology can actually replace a compliance team”.