The digitalisation of banking services is a trend that can be seen in most European retail banks, where customers are being encouraged as much as possible to carry out their day-to-day operations online rather than in a branch.
On 16 September, Claude Meisch (DP), minister for higher education and research, and Marc Hansen, minister delegate for digitalisation, validated a new procedure for the digitalisation of the application and granting flows of student loans granted by the Luxembourg state. Spuerkeess has been designated by the ministry as a pilot bank to launch the system before it is extended to all banks under agreement at the start of the 2023/2024 academic year.
Disintermediation, or "uberisation,” is one of the characteristics of the blockchain technology used in this process, which creates a secure data exchange network validated by all members who can interact with it. Here, the technology used (for the public sector blockchain, on which this project has been implemented in partnership with the State Information Technology Centre), is private Ethereum. It is a blockchain medium that allows for security reporting throughout the process.
The real gain? Time!
From now on, there is no need to physically go to the ministry, then to the bank with forms allowing the release of funds. The Cedies loan authorisation is based on a QR code, which the ministry sends to the student electronically. The student scans it with their mobile banking application (S-net for Spuerkeess), the grant is "recognised" as valid by the bank, which releases the funds to his account instantly. A PDF document serving as proof of payment can be printed out by the student from this same web application. This is useful, for example, for putting together a file for renting a flat or enrolling in a paying school.
The process saves a lot of time for everyone, as the form no longer 'travels' from desk to desk before being handed over to the student, and then finally being deposited at the bank and processed in various registration departments. At Spuerkeess, more than 13,000 student loans per year are affected by this new procedure, which has already been adopted by three quarters of the service's clients.
Mastering technology
This partnership might not have been possible without an initiative launched by Spuerkeess in 2018 with the SnT (Interdisciplinary Centre for Security, Reliability and Trust). The bank approached this research laboratory attached to the University of Luxembourg to understand how blockchain could add value to their service offering.
Christophe Medinger, deputy head of business unit digitalisation at Spuerkeess, explains: "Three or four years ago, no one in the big banks really dared to take the plunge. The SnT helped us train staff in this technology, and we did tests to see how it could be adapted to our servers. We found practical use cases adapted to our activities. The student loan was the first. In exchange, we co-financed part of the PhD projects of this research unit. Today, we can say that we have mastered the technology.”
The bank does not disclose the budget it has devoted to it, but Medinger says that "the teams have invested around 300 days of development time.”
Today, we can say that we have mastered the technology.
No student loans in cryptocurrencies
In the long term, Spuerkeess plans to extend the use of blockchain to activities such as the transfer of securities, for much larger amounts: "This can only be done within an up-to-date regulatory framework with the relevant authorities. For regulation to support initiatives, there needs to be multiple initiatives to show that the demand is real and the technology is mastered."
For the time being, Spuerkeess does not plan to integrate cryptocurrencies into its online banking, at least those that currently exist on the markets “but we are interested in initiatives related to the creation of the digital euro,” says Medinger.
As for traditional home loan applications, they are still subject to prior interviews with an advisor “because it is a tradition and it is still complex to fully digitalise.” Spuerkeess also remains attentive to digital trends, which it wishes to support: “I think that the next blockchain subject is in the initiatives linked to the tokenisation of real estate investments,” says Medinger.
Students have until 30 November to apply for loans from the ministry, which also provides direct grants. The state spent €122m in 2019 on student financial aid, according to the ministry of higher education and research. The amount is expected to reach €130m by the end of 2021 and €140m in 2023.
This story was first published in French on . It has been translated and edited for Delano.