Insights on Luxembourg banks' digitalization
In today’s landscape, business strategy and technology strategy are inseparable. Winning in the marketplace now requires investment in technology across all levels of an organization. KPMG Luxembourg, in cooperation with the Private Banking Cluster of the Luxembourg Bankers’ Association (ABBL), presents a study that examines the ongoing digitalization of Luxembourg’s banks. It focuses on organizational strategies, tools, client interactions and collaborations, particularly between universal, private banks and fintechs.
What digital transformation meant for banks 2 to 3 years ago is nothing compared to today’s reality. Digitalization is now the cornerstone of business success, the powerful tool that not only bridges gaps but also unlocks and drives competitive advantage.
— Xavier Roch Lhotellier, Partner, Advisory, KPMG Luxembourg
Our respondents in numbers
- 23 respondents,
12 of which are headquartered in Luxembourg - More than EUR 285 billion of total AuM
- Representing 50% of the Luxembourg market
Key takeaways
- Strategy and organization
- Tools and systems
- Fintech and collaboration
- Universal vs private banks
Is digital transformation the priority for Luxembourg’s banks?
Digitalization: Progress has been made, but the work is not done
Luxembourg's banks show mixed progress in digital maturity, with more work needed to fully realize their digital potential. Only 57% of the banks surveyed prioritize digital transformation in their strategies.
13%
Having discussions on digital transformation.
22%
Recognizing digital transformation as a component alongside others.
57%
Prioritizing digital transformation and naming it among their top priorities.
9%
Emphasizing digital transformation in the development strategy.
Do banks have the necessary resources to achieve digital transformation?
A major gap between digital expectations and allocated resources
The digitalization of Luxembourg’s banking sector drives a growing need for specialized skills. 52% of respondents lack the right in-house skills to support their digital transformation projects. Nearly 60% of respondents allocate less than 10% of their training budget to digital and technical topics.
Limited investment in corporate digital governance and technical training, along with a shortage of skilled digital professionals in Luxembourg, may hinder the future health of concerned banks.
Only 30% of banks have a head of digital transformation or an equivalent role in their Luxembourg legal entity, while 70% do not.
Next: Tools and systems
If resources are limited, what about the tools and systems available?
In-house digital solutions continue to lead the way
There is a clear preference for in-house, custom-designed integrated risk management (IRM) and CRM systems tailored to specific needs, with major commercial solutions used less frequently.
56%
of respondents are currently using an in-house custom IRM system, while 33% are utilizing an in-house manual IRM system.
40%
of respondents are using an internal CRM system.
6%
are using an internal HR system, while 94% rely on externally developed solutions. Notably, none of these systems are part of the core banking system (CBS).
To what extent is the Luxembourg banking sector interested in hyperautomation?
Adoption of hyperautomation – including robotic process automation (RPA), artificial intelligence (AI), machine learning (ML) and low-code platforms – is progressing but varies in maturity
In Luxembourg's banking sector, some banks are integrating hyperautomation technologies, while others remain in early testing phases or using them sparingly.
18%
of respondents believe hyperautomation has no added value.
36%
of respondents have already tested one or more hyperautomation solution(s) but did not fully achieve the project.
27%
of respondents are using hyperautomation solutions but on a limited scope.
9%
of respondents use one or more hyperautomation solution(s) on a regular basis.
Next: Fintech and collaboration
If investing internally isn’t the solution, are fintech collaborations always the best way forward?
Fintech is viewed as a tool for enhancing efficiency and compliance
Fintech is seen as more helpful for boosting efficiency and addressing banks’ increasingly complex compliance requirements. Banks are increasingly leveraging fintech solutions to drive digital transformation and meet the demands of tech-savvy clients. For instance, 64% of respondents see a use of Fintech collaboration for Regulatory topics. However, they still may hesitate to partner with fintechs due to several concerns.
Next: Universal vs private banks
Is there a significant gap in digital transformation between universal and private banks in Luxembourg?
A digital divide exists between universal and private banks
Generally, universal banks enjoy more decision-making power and in-house skills for major projects, while private banks face more challenges due to limited autonomy and resources.
Holding full autonomy over transformation and digital projects within the Luxembourg legal entity
8%
Private banks
40%
Universal banks
There is an inverse correlation regarding in-house digitalization skills, with universal banks typically having enough (78%), while private banks are largely lacking (75%).
Possessing the right in-house skills to support digital transformation projects in the Luxembourg legal entity
Private banks
Universal banks
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