But while firms can have the most innovative products and services on the market, they can still face big stumbling blocks. The 18 Luxembourg regtech firms that took Delano’s survey cited the challenges of winning trust, low adoption rates, a potential skills shortage and the need for more industry action.
Slow take-up rate
“Luxembourg is strongly focused on big branded companies and it is difficult for startups to get some traction,” says Audric Debaisieux at Apentis.
“To make Luxembourg’s regtech scene a success, the target clients of regtech startups must have faith in the new applications and implement them,” says Cécilia Vernhes of Nadi Solutions. “It is especially true in the fund industry: only once the bigger players have placed their trust in the small, agile companies will the synergies and success stories emerge. The stringent requirements of the legal, operational and risk departments of the fund industry’s big players almost preclude working with a regtech startup.”
Jörg Reinking of Secourriel agrees: “Purchasing departments of global banks are hard to persuade. Often, they ask for a long track record and high financial reserves. But regtechs stand for brains not cash. It would be helpful if the purchasing policies are extended to also consider innovative, smaller players. Maybe a general financial guarantee for regtechs in the bid process could bridge that gap.”
“Although Luxembourg has a wonderful ecosystem with a lot of support from the government, the level of regtech inclusion (the number of regtech used by companies) is still the lowest level in Europe,” says Laurent Denayer of Ume.
“This is predominantly a question of mentality.” Egide Thein at Truth Technologies agrees: “It is difficult to compete internationally. The local culture is probably not conducive to really embracing regtech.”
Olus Kayacan at Governance.com reckons that “Luxembourg regtech is dynamic with several promising companies. The challenge is to boost one of the lowest adoption levels globally among regulated companies. This is where accelerators, incubators and influencers can help regtechs.”
There’s also the need to develop more skills and resources. “Luxembourg is very well placed thanks to the strength of its financial sector and the job done by governments and regulators over the years,” says Yoann Jagoury at Alto Advisors. “Yet competition is fierce and Luxembourg needs to address at least two main topics. [First,] continue the work done on education and facilitating the acquisition of talents from abroad. We still lack the pool of technical talents that some other countries have. [And] further develop the local ecosystem of companies founded and established in Luxembourg, that will be there in the long run to develop the fintech workforce even when the hype is gone.”
Fundsquare’s Olivier Portenseigne concurs: “Luxembourg created a favourable framework”, but needs to do more “to attract the right talent and free more capital to help these players.”
In addition, an increased level action is needed nationally, entrepreneurs told Delano. “Private and public institutions should ‘export’ more innovative Luxembourg-based companies abroad,” suggests Jeremy Antkowiak at Algoreg.
SnapSwap’s Adeline Poun posits: “We need more industry-wide events of top ranking players to expand international exposure and recognition of the Luxembourg regtech cluster.”
At the same time, it’s still up to entrepreneurs to do their homework, reckons Raoul Mulheims of Finologee. “Regtechs have to do [go] the extra mile to become eligible to work with regulated players, to become compliant from a regulatory perspective (get a licence or use appropriate frameworks or platforms) and to create ready-to-use products and services.”