Undeterred by the shadows cast by financial technology giants London, New York and San Francisco, smaller locations are increasingly vying to establish themselves on the international fintech map. Luxembourg, its leading officials say, has the ideal framework in place to become a thriving hub for innovative start-up companies and offers a less saturated base of operations than the larger hubs. But with a start-up scene so young, whether the country of 500,000 people can attract the required human talent and entrepreneurs to attain hub status remains to be seen. 

“We are a very major player in FDI and fintech, and we are going to become even more so in the future,” says Pierre Gramegna, Luxembourg’s minister of finance. Well known as a leading private banking centre in Europe and home to the second largest investment fund centre globally after the US, Luxembourg has for decades been a major player in finance. Now it aims to use this expertise in the field of disruptive technologies that change the way financial institutions do business. 

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This growth, Mr Gramegna says, will be driven not just by multinationals but by innovative start-ups and SMEs as well. And so far the signs are positive – nearly 70% of the fintech companies operational in Luxembourg are less than three years old. “Companies already finding solutions for financial entities are teaming up,” says Mr Gramegna. “The technology players, banks and others are already here and are able to work together to upgrade their services.” Indeed, more than 2000 ICT firms and 140 banks form part of Luxembourg’s economic landscape, creating a substantial customer base for young fintech start-ups to test and market their services. 

Early days 

The sector, however, is still very young, according to Charles-Louis Machuron, founder of Silicon Lux, a website and news platform dedicated to promoting Luxembourg’s start-up community. “Luxembourg has a very young start-up ecosystem – we only have about 150 start-ups in the country across all industries. But it is innovating with the support of the government and there is a growing presence of public-private partnerships in terms of initiatives and incubators.”

These partners include agencies for the development of finance industries and innovation such as Luxembourg for Finance, Lux Innovation, Digital Luxembourg, and accelerators such as the finance ministry’s Luxembourg House of FinTech, all of which work to support start-ups. Lux Innovation recently launched its Fit For Start programme, which offers €50,000 government grants and a three-month programme to assist in the development of early-stage start-ups. 

Fintech start-ups founded in Luxembourg include Loomion, which produces secure corporate governance solutions for digital information exchanges; Nexvia, a personal finance service for individual property transactions; and Neurodecision, which offers scientific customer risk profiling for financial advisers. Luxembourg’s incubators are generally private but with public grants, says Mr Machuron. The country’s main start-up incubator is called the Technoport, and others include the Luxembourg Future Lab, an incubator created by French bank BNP Paribas, an accelerator from consulting firm PWC, and the Cube, an accelerator launched by KPMG.

Collaborative thinking 

In late February 2016, Luxembourg hosted FinTechStage, a conference and platform for local players to showcase their fintech credentials and collaborate with like-minded companies. FinTechStage co-founder Lazaro Campos calls the event “a network of innovators obsessed with driving entrepreneurship and investing in fintech”, and adds that it is hosted strategically in cities that are not yet established tech hubs, in an attempt to help with their development.

“At FinTechStage we try to go to places where that ecosystem doesn’t exist yet and try to foster it,” says Mr Campos. “That is why we go to Barcelona, to Milan, to Buenos Aires. We’re trying to get all the players together to talk about how to create those ecosystems. And very often you find that the pieces are there, but they are not interconnected.” 

So why did FinTechStage choose to come to Luxembourg? “The conditions are right," says Mr Campos. "Many of these are companies with significant investment from US investors, and [the investors] find that the right way to get into Europe is an entrance through Luxembourg. They see it as an entry point to becoming a European proposition. That confirms something is going on here.” Sixteen start-ups spoke at February’s Luxembourg FinTechStage, according to Mr Campos, and two came from Silicon Valley. “In London or New York you feel like one in a million. Here, you can really partner with local banks to learn and to make sure your proposition is more attractive. That is what makes Luxembourg different,” he adds.

Breaking ground 

Luxembourg notched up an important landmark in fintech as the first European country to grant a payment institution licence to a virtual currencies operator. The country’s financial regulator, the Commission de Surveillance du Secteur Financier, was the first supervisory authority on the continent to take an official position on the topic, defining virtual currencies as “scriptural money”. The licence – awarded to San Francisco-based start-up SnapSwap – allows it to offer payments, remittances and currency exchange services using modern cryptographic technologies, crypto-currencies and internet protocols such as Blockchain. SnapSwap officially began its EU operations out of Luxembourg in January 2016. 

“If the conditions are right [as they are] in Luxembourg – where you have a government that is truly interested in fostering the right platform for fintech companies to thrive and to partner with financial institutions – that’s an environment that really attracts them,” says Mr Campos. Luxembourg is also ranked a respective fourth and fifth in terms of government success in ICT promotion and the importance of ICT to the government's vision, according to the World Economic Forum 2015 Global IT Report. 

“The big challenge we have in Luxembourg is attracting talent,” says Mr Machuron at Silicon Lux. “We definitely have a lack of young talent between the ages of 25 and 35. But the fact is that if you launch a fin-tech startup in Luxembourg, you have all the clients and financial players in one city. If you want to start a fintech start-up, this is the place to launch it. But Luxembourg lacks a public image in this field, so we are now really working on national branding.” 

The crucial next step, therefore, is branding Luxembourg effectively to attract that talent. “Unfortunately there isn’t a loud enough voice – Luxembourg’s fintech community doesn’t project what it has loudly enough,” says Mr Campos. “This is what the government is working on – how to create a campaign with that voice. It’s about crafting the right messages, the right headlines of what is it that we provide, and then selecting the right channels – whatever it takes to reach those people who will be looking for landing pads.”

Undeterred by the shadows cast by financial technology giants London, New York and San Francisco, smaller locations are increasingly vying to establish themselves on the international fintech map. Luxembourg, its leading officials say, has the ideal framework in place to become a thriving hub for innovative start-up companies and offers a less saturated base of operations than the larger hubs. But with a start-up scene so young, whether the country of 500,000 people can attract the required human talent and entrepreneurs to attain hub status remains to be seen. 

“We are a very major player in FDI and fintech, and we are going to become even more so in the future,” says Pierre Gramegna, Luxembourg’s minister of finance. Well known as a leading private banking centre in Europe and home to the second largest investment fund centre globally after the US, Luxembourg has for decades been a major player in finance. Now it aims to use this expertise in the field of disruptive technologies that change the way financial institutions do business. 

This growth, Mr Gramegna says, will be driven not just by multinationals but by innovative start-ups and SMEs as well. And so far the signs are positive – nearly 70% of the fintech companies operational in Luxembourg are less than three years old. “Companies already finding solutions for financial entities are teaming up,” says Mr Gramegna. “The technology players, banks and others are already here and are able to work together to upgrade their services.” Indeed, more than 2000 ICT firms and 140 banks form part of Luxembourg’s economic landscape, creating a substantial customer base for young fintech start-ups to test and market their services. 

Early days 

The sector, however, is still very young, according to Charles-Louis Machuron, founder of Silicon Lux, a website and news platform dedicated to promoting Luxembourg’s start-up community. “Luxembourg has a very young start-up ecosystem – we only have about 150 start-ups in the country across all industries. But it is innovating with the support of the government and there is a growing presence of public-private partnerships in terms of initiatives and incubators.”

These partners include agencies for the development of finance industries and innovation such as Luxembourg for Finance, Lux Innovation, Digital Luxembourg, and accelerators such as the finance ministry’s Luxembourg House of FinTech, all of which work to support start-ups. Lux Innovation recently launched its Fit For Start programme, which offers €50,000 government grants and a three-month programme to assist in the development of early-stage start-ups. 

Fintech start-ups founded in Luxembourg include Loomion, which produces secure corporate governance solutions for digital information exchanges; Nexvia, a personal finance service for individual property transactions; and Neurodecision, which offers scientific customer risk profiling for financial advisers. Luxembourg’s incubators are generally private but with public grants, says Mr Machuron. The country’s main start-up incubator is called the Technoport, and others include the Luxembourg Future Lab, an incubator created by French bank BNP Paribas, an accelerator from consulting firm PWC, and the Cube, an accelerator launched by KPMG.

Collaborative thinking 

In late February 2016, Luxembourg hosted FinTechStage, a conference and platform for local players to showcase their fintech credentials and collaborate with like-minded companies. FinTechStage co-founder Lazaro Campos calls the event “a network of innovators obsessed with driving entrepreneurship and investing in fintech”, and adds that it is hosted strategically in cities that are not yet established tech hubs, in an attempt to help with their development.

“At FinTechStage we try to go to places where that ecosystem doesn’t exist yet and try to foster it,” says Mr Campos. “That is why we go to Barcelona, to Milan, to Buenos Aires. We’re trying to get all the players together to talk about how to create those ecosystems. And very often you find that the pieces are there, but they are not interconnected.” 

So why did FinTechStage choose to come to Luxembourg? “The conditions are right," says Mr Campos. "Many of these are companies with significant investment from US investors, and [the investors] find that the right way to get into Europe is an entrance through Luxembourg. They see it as an entry point to becoming a European proposition. That confirms something is going on here.” Sixteen start-ups spoke at February’s Luxembourg FinTechStage, according to Mr Campos, and two came from Silicon Valley. “In London or New York you feel like one in a million. Here, you can really partner with local banks to learn and to make sure your proposition is more attractive. That is what makes Luxembourg different,” he adds.

Breaking ground 

Luxembourg notched up an important landmark in fintech as the first European country to grant a payment institution licence to a virtual currencies operator. The country’s financial regulator, the Commission de Surveillance du Secteur Financier, was the first supervisory authority on the continent to take an official position on the topic, defining virtual currencies as “scriptural money”. The licence – awarded to San Francisco-based start-up SnapSwap – allows it to offer payments, remittances and currency exchange services using modern cryptographic technologies, crypto-currencies and internet protocols such as Blockchain. SnapSwap officially began its EU operations out of Luxembourg in January 2016. 

“If the conditions are right [as they are] in Luxembourg – where you have a government that is truly interested in fostering the right platform for fintech companies to thrive and to partner with financial institutions – that’s an environment that really attracts them,” says Mr Campos. Luxembourg is also ranked a respective fourth and fifth in terms of government success in ICT promotion and the importance of ICT to the government's vision, according to the World Economic Forum 2015 Global IT Report. 

“The big challenge we have in Luxembourg is attracting talent,” says Mr Machuron at Silicon Lux. “We definitely have a lack of young talent between the ages of 25 and 35. But the fact is that if you launch a fin-tech startup in Luxembourg, you have all the clients and financial players in one city. If you want to start a fintech start-up, this is the place to launch it. But Luxembourg lacks a public image in this field, so we are now really working on national branding.” 

The crucial next step, therefore, is branding Luxembourg effectively to attract that talent. “Unfortunately there isn’t a loud enough voice – Luxembourg’s fintech community doesn’t project what it has loudly enough,” says Mr Campos. “This is what the government is working on – how to create a campaign with that voice. It’s about crafting the right messages, the right headlines of what is it that we provide, and then selecting the right channels – whatever it takes to reach those people who will be looking for landing pads.”