Securing New Financial Services
Securing New Financial Services
The digitization of financial services presents enormous opportunities for Luxembourg’s financial sector and is of critical importance for the future of banks, asset management firms, and financial service providers in general. Earlier this year, the Luxembourg Banks and Bankers Association (ABBL) established a cluster with the mission of developing and disseminating digital and FinTech expertise, as well as sharing information on initiatives in these areas. U&Us spoke with Jean Hilger, who will lead the ABBL’s Digital Banking and FinTech Innovation cluster over the next two years.
The financial sector is one of the most specialized: a wide range of activities—banking, asset management, insurance—with unique processes, heavy regulation, high IT consumption, and therefore prime candidates for digital transformation. In this context, what role is the cluster expected to play?
"The cluster has set three main objectives. Its first goal is to develop practical knowledge at all levels within ABBL member organizations. Awareness of FinTech is already high in the financial services community, and one might think everything has already been said. But the cluster aims to go further, providing in-depth knowledge that enables members to assess different FinTech models and apply new technologies within their own organizations."
"Together with the House of Training, we are developing courses on data analytics, blockchain technologies, digital transformation, and cybersecurity, which will be added to the training catalog available to financial sector employees. We are also organizing tailored trainings and presentations for executives and middle management, starting with ABBL’s own structures."
"The cluster’s second goal is to strengthen collaboration on regulations with authorities such as the CSSF or the CNPD, ensuring that opportunities offered by new technologies and Luxembourg’s efforts to position itself at the forefront of digital financial services are adequately considered."
"The third goal involves tangible short-term initiatives to be implemented this year. For instance, we are developing a database of FinTech companies connected to Luxembourg and organizing thematic pitching sessions with our members, allowing new FinTech solutions to be directly evaluated by financial sector professionals. On a more ambitious level, we are launching a research project with the University of Luxembourg, confident that ABBL can contribute to cutting-edge industrial solutions and strengthen Luxembourg’s knowledge ecosystem around advanced FinTech solutions."
Key Risks and Challenges for the Banking Sector
"Clearly, embracing all possibilities offered by the digital transformation of financial services will be challenging. The main challenge is understanding and analyzing the benefits and resilience of new business models and implementing advanced technologies that require new levels of expertise within our organizations. While this is not entirely new, the pace of change and the momentum provided by new technologies have increased, giving early adopters an advantage in terms of experience and market share."
"Banks, in particular, must closely examine data-driven financial services, which create value both for clients and for risk management functions through data analytics. Blockchain technology is another key trend to watch. Blockchain has the potential to streamline complex processes, much like virtual currencies bypass traditional clearing systems for payments. Finally, cybersecurity remains fundamental, as these new services rely on data processing and telecommunications and must be secured to earn customer trust."
According to Websense’s latest financial services report, globally, security incidents are three times more frequent in this sector than in other industries. Websense’s research also highlights a high level of specialization among criminals targeting financial services and significant investment in attack preparation. Cybercriminals today possess sophisticated tools and, in some cases, financial sponsors to support their actions. How does Luxembourg’s financial sector respond to increasingly capable attackers?
"Implementing cyber defense systems has clearly become a top priority for banks and the financial sector as a whole. Management teams have recognized the potential impact of cyberattacks and the reputational risks involved. In recent years, we have observed a professionalization of IT security that goes beyond monitoring digital banking tools, analyzing cybersecurity risks across all activities of a financial institution. This includes increasing specialized personnel, countermeasure exercises, dedicated budgets, expert audits, and regular reviews of security measures."
Regulatory Influence on Information Security Governance
"Cybersecurity is considered a major risk by regulators. Systemic banks, for example, must report directly to the European Central Bank in Frankfurt regarding their ability to respond to cybersecurity risks. The level of requirements and specificity in their requests equals—or is inspired by—certain military-grade security standards."
Do policymakers fully grasp the danger posed by cyber threats? Is there a need for a more adaptive regulatory framework to support defense mechanisms in the industry and supervisory authorities?
"I believe public authorities are well aware of the threats, their forms, and the ever-evolving contexts. They have already provided a national institutional response through European alliances and the creation of a dedicated university research center, among others. However, a country’s exposure to cybersecurity risks is growing exponentially. While financial services have always been highly computerized and connected—and thus exposed to risks—today, in addition to traditional IT, operational technology must also be considered, including supply chain services, transport, energy, public safety, healthcare, water management, and all industries implementing the Internet of Things. The era of cyber tranquility has not yet arrived."
