Dr. Prof. Gilbert Fridgen is a professor at the Interdisciplinary Center for Security, Reliability and Trust (SNT).  Photo: 101Studios

Dr. Prof. Gilbert Fridgen is a professor at the Interdisciplinary Center for Security, Reliability and Trust (SNT).  Photo: 101Studios

As part of the 10×6 Luxembourg Finance 2035, organised by the Paperjam Club on Tuesday 19 November, Dr. Prof. Gilbert Fridgen, professor at Interdisciplinary Center for Security, Reliability and Trust and PayPal-FNR Pearl chair in digital financial services , shares his background and views.

How will environmental and social criteria influence investment and financial decisions between now and 2035?

Dr. Prof. : The financial system is crucial to meeting our most pressing challenges. For example, we will not be able to move towards a carbon-neutral society without mobilising private investment. The problem is one of information. To make informed decisions, investors need adequate information, including information on the environmental or social characteristics of an investment.

Today’s financial system struggles to provide this kind of information. First, there are no universally accepted standards for data exchange. Second, the accuracy of the data needs to be assured along the entire value chain. Third, the sheer volume of data to be processed and interpreted by investors will grow exponentially. To meet these challenges, we need cutting-edge information technology, including AI to handle the data and cryptographic solutions to ensure its accuracy.

How do you think AI will influence the world of finance over the next 10 years? 

Financial services is all about data, and AI is built to handle large amounts of data. Recent advances in deep learning and large language models are greatly expanding the data that AI can effectively handle: AI can now interpret or create text or even images. The challenges will lie in the imperfection of AI tools: We expect computers to deliver precise results--and this is how regulations are made. We will have to allow computers to make mistakes, just as humans do.

The development of AI does not necessarily mean that there will be fewer people working in the financial sector. However, they may be doing different types of jobs. On the one hand, we will need more technical specialists to handle AI solutions, and on the other hand, we may see more people at the interface with the end customer, who may trust a person more than a computer. This is why the multidisciplinary skills of our workforce will be more than necessary in tomorrow's financial centre. The FutureFinTech initiative responds to this challenge through training for finance professionals run jointly by SNT and the University of Luxembourg’s Faculty of Law, Economics and Finance.

What role do you think cryptocurrencies will play in the global financial system? What kind of impact will they have in the short,  medium and long term?

This is a bit like looking into a crystal ball, but given the information currently available to me, I don’t think cryptocurrencies as such will play a big role. Bitcoin and Ethereum may be used for certain purposes, such as storing value. But there has not been a lot of innovation in the last few years, phenomena like NFTs have come and gone. 

However, I still think there may be some opportunities for solutions that build on the underlying technologies. Central banks are likely to issue digital currencies, such as a digital euro, which could have some implications for monetary policy. Digital assets could be used to increase efficiency in the financial system, for example by replacing intermediaries. But all this will take time.