“It’s going to be a tough year,”  Zubairi notes. “Financial institutions’ profit margins are low while compliance costs rise. I’m not sure which way this is going to go.”

In a gloomy scenario, squeezed margins could shrink capital expenditure. However, Zubairi is cautiously optimistic about what this might mean for Luxembourg fintechs. “Part of the solution is investing in back-office technology that drives down costs. Fintechs in Luxembourg could be stable as they focus on regulatory technology and solutions that fit with the environment of Luxembourg.”

The same opportunity could apply to sustainable finance. “Data and regulatory uncertainty, ESG concerns, banks and funds. Technology is one of the only ways to do this in a productive manner.” Progress, however, will slow in distributed ledger technology. “Why? Because DLT really does require significant investment and change in infrastructure.”

Wage indexation and talent shortages will be one of Luxembourg’s biggest near-term challenges. “A minimum rise of 7.7% is a big hit for businesses in financial services, where salaries are the largest cost component.” And regarding talent, Zubairi notes that “talent shortages are everywhere.” However, he concedes “the cost of living in Luxembourg is a big drawback.”