Nasir Zubairi of the Luxembourg House of Financial Technology has some very particular views on some of the newer varieties. About blockchain: “I’m not a technologist, but it seems a little hazy to me as a technology in that it’s a technology looking for a use case. Why is that the most optimal technology for anything?” On cryptocurrencies, he said “I personally would not have touched it being an ex-currency trader myself. I just couldn’t get to grips with the value of any crypto currency.”
Podcast:
Zubairi has surprised some by bringing a sceptical eye to claims made for the latest and greatest technology. Speaking at a recent financial technology conference – the Finverse Forum that focussed on cutting edge issues such as Non-Fungible Tokens (NFTs) and the multiverse – he allowed as to how “we’re being sold on innovation by a bunch of firms that have a lot of money to spend on marketing.”
Luxembourg’s financial centre has shown itself willing to try anything to maintain its market leading position. One of the key ways it does this is by taking advantage of any new technology that might make a difference to the bottom line – cutting costs, expanding the client base, meeting client needs or developing new products and being open to further innovation.
Public-private technology effort
One of the key levers to advance this cause is the organisation Zubairi represents, best known as the LHoFT, which was set up in 2016 as a public-private sector initiative to help financial firms adopt and push further with digitalisation. Investment Officer recently met up with him to get his views on such issues.
Zubairi is happy with the progress his organisation has made in delivering on its mandate. “We have gone from a relative handful of firms in 2016, to a much broader base of FinTech firms that are very uniquely catered for the challenges and opportunities that the traditional finance sector has in Luxembourg.”
There are now 84 companies currently in residence at the LHoFT and it is connected with over 250 Fintech firms in Luxembourg, employing over 5,000 people. The organisation has directly raised over €400 million from private and public capital sources, as part of the over €1 billion in funding raised by LHoFT members and residents. It has organised over 200 webinars with speakers and attendees from around the world. LHoFT was part of an initiative involving several Luxembourg tech entities to found the Luxembourg Blockchain Lab.
While some of the more-high profile initiatives in financial technology have concerned the retail banking sector, Zubairi emphasised that technology use in investment and asset management has always has been a LHoFT priority. He explained that since the financial crisis, the this area of the financial sector has seen increasing regulation as well as costs associated with its implementation. “There is a lot of emphasis around technologies that can provide efficiencies and therefore lower costs in the back office,” he said, adding that this is related to fund reporting, compliance, data management etc.
Education still needed
While some large firms such as State Street have taken some steps into cutting edge areas such as tokenisation, Zubairi said “there’s still a long way to go around education.” He explained that “The traditional finance sector still is very much lacking in the skill set and know how around tokenisation to fully perceive the benefits.”
He pointed to some misconceptions about tokenisation and blockchain being conducive to money-laundering. “The numbers do indicate that, overarchingly, the tokenisation technology, blockchain in itself, potentially lends itself to minimising or completely eradicating any form of money laundering if properly monitored and controlled.”
Zubairi highlighted the LHoFT’s undertaking, along with PwC, of a “very large scale comprehensive study on crypto and asset management in Luxembourg” as being part of its role.
Sounding board
LHoFT is working on using digitalisation in an impact investing context as part of a Luxembourg government development programme called “Catapult Inclusion Africa”, which is aimed at making an impact on financial inclusion on the continent. He said he sees the impact of digitalisation on enhancing financial inclusion in developing markets like Africa as “potentially greater than the impact of FinTech in the developed markets.”
In the more conventional financial area of private equity, Zubairi noted that “we are seeing many technologies being developed to allow for better data consolidation to allow private equity investment managers to make better decisions with their investors.” He went on to add that “data is the key to everything ultimately”.
Sector lags a little
However, he noted that, in many ways, “the investment management sector has been lagging a little bit, say compared to the introduction of technology in the more traditional banking sector.” He urged it to look at the marginal benefits that can be delivered with technology across the investment management value chain.
Link to the podcast:
Related articles on Investment Officer Luxembourg:
- Cryptocurrency crash to bring regulation – but how much?
- ‘Luxembourg set for mass adoption of tokenisation’
- Luxembourg’s crypto opportunity demands a collective move
