FinTech Summit: The Advent of a Cashless Society



During the two days of ICT Spring, international and local experts gathered at the European Convention Center Luxembourg – but also virtually – to participate to the Fintech Summit and discuss the latest trends of the boiling sector. The first morning session was moderated by Rik Coeckelbergs, Founder, The Banking Scene.

“The past 15 months, we experimented resilience, we found solutions to ease the life of our customers and the pandemic even allowed us to know ourselves better”, said Rick Coeckelbergs emphatically, before giving the floor to Oded Salomy, Director of Payment Systems and Member of Management, Bank of Israel, live from Tel Aviv, who delivered a talk titled “Breakthroughs and innovation in the global payments industry: where does digital currency stand?”.

Oded Salomy first provided an overview of the payment methods in use by the public which, except for cash, are digital with checks also migrating to the digital domain. Digital payments can be divided in three categories: Central Bank Digital Currencies (CBDC) which are issued by a sovereign monetary authority and maintain a stable value; stablecoins, backed by stable assets, issued by private entities; and cryptocurrencies with no intrinsic value, and are generally volatile. The latter being therefore not generally used as a payment method but rather as an investment asset.
Each payment method is different but the structure is the same: “There is an intermediary between the customer and the merchant, a PSP, which can be a bank, a fintech, a big tech or a credit card company”. Salomy noticed that “almost all payment innovations except crypto ride the rails of existing payment systems or new iterations of the same systems”.
Beyond these technological considerations, Bank of Israel expert raised a paradox: if we consider the number of transactions, payments come largely ahead of current accounts and credit. But in terms of revenues and profits, payments are in last position, far behind current accounts and especially credit. If the payments remain interesting, it is because they are a tool to engage the customer towards other financial products.

According to Salomy, “Fintech for the moment is focusing on niche markets, such as B2B cross border, but in each niche market there are huge pools of money in transactions and fintech can help the users’ experience and reduce the cost”. Another trend is the “unbundling of financial roles and products by banks and fintech”. Account opening, single-use card, loan sales, transaction monitoring, fraud detection, cybersecurity, ATM access… “All these products and services used to be performed as one, by banks. Now we are seeing a huge fragmentation, thousands of companies providing one, two or three of these services.”

Oded Salomy was then joined by Yoav Soffer, Advisor to the Deputy Governor, Bank of Israel, also live from Israel, to discuss CBDCs and the digital shekel project being examined by the Bank of Israel. If the Jewish State is considering issuing a CBDC, the decision has yet to be made, although more countries are investigating the matter. “It’s important to emphasize that no developed country has yet made the decision neither announced a decision that it will launch a CBDC. However, more and more central banks are considering so, whether it is a short term (3 years) or an intermediate term (6 years)”, said Yoav Soffer.
And Oded Salomy followed: “Why do we even need a CBDC, in Israel or elsewhere?” Yoav Soffer to answer that “CBDC doesn’t come without risks. The main risk is bank disintermediation because the money that we keep in our current account is used by the banks to provide credit and liquidity to the economy. If people prefer to put their money in CBDC instead of traditional banks, it can have significant implications.” Soffer also mentioned cyber risk, risk to privacy, impact on money transmission or a risk to the central bank’s reputation because of technical failure of the system may affect public trust. On the other hand, there are multiple motivations for a Digital Shekel such as: adapting to the needs of the digital economy, reducing the use of cash and struggling against the “underground economy” or providing an efficient and inexpensive infrastructure for cross-border payments.

The first morning session of FinTech Summit continued with a round table around the topic : “What are the opportunities and limits of a cashless society? What to expect within the next 5 years?”, moderated by Rik Coeckelbergs with the participation live of Rik Goslinga, Director Product Marketing Management, Paypal, Didier Richter, Head of Daily Banking & Payments, Banque Internationale à Luxembourg (BIL), Martha Mghendi-Fisher, Founder & Executive Board Chair, European Women Payments Network (EWPN), Founder & Executive Board Chair, African Women in Fintech & Payments (AWFP), and remotely of Sundeep Gantori, Equity Strategist, Chief Investment Office, UBS Global Wealth Management.
To the question asked by Rick Coeckelbergs (photo), "why does it take so long to go cashless?", Rick Goslinga argued that “the last 18 months, we have moved very quickly even if cash is still dominant in many countries”. It is a question linked to user behaviour, which brings us to the issues of trust and convenience. “You need a platform built on trust and security. It’s a journey. It’s not about going cashless, it’s much more about going digital.”

“But does a cashless society lead to more financial inclusion or exclusion?”, asked Rick Coeckelbergs. For Martha Mghendi-Fisher, there are “two sides of the story”. In developing countries such as Africa, going digital can be a tool for inclusion for people excluded from the traditional financial system. It gives the opportunity to have access to a whole range of financial services, simply through a mobile phone. But in Europe, “for people who are vulnerable, like the elderly, the homeless people or people with mental health issues, the move towards a cashless society will create exclusion because of a lack of access or education in the use of digital tools”.
A reason the BIL, even with less branches and ATM, still cover the whole Luxembourg with physical structures, stated Didier Richter. The bank also organizes workshops to help people handle digital tools like smartphones and apps.

On the investment opportunities side, for the equity strategist Sundeep Gantori, there is no massive overheating in the Fintech market. In 2020, globally, the investment in FinTech start-ups was around 44 billion dollars compare to the first half of 2021 with almost 54 billion. And for the next five years, “we are looking for a strong growth not only in payments but also for example in InsurTech or Regtech”. For Gantori, fintech leaders should learn from other growing fields like e-commerce, cloud or digital advertising, and embrace their best practices. “Fintech should focus on platforms, not only products, by bringing elements of subscription. They should not shy away from investing in moonshots or frontier technologies like AI and blockchain. Fintech should also take a look on costs, cost structures as well as a long profitability roadmap. And last but not least, Fintech should focus on capturing some other frontier markets like Latin America.” 
The organizers than welcomed Jonathan Prince (JP), Co-founder, Finologee as a moderator of a round table around the “Luxembourg Fintech success story, from Digicash to Payconiq”, with the participation of Stijn van Brussel, COO, Payconiq, Serge Wagener, Vice President & Head of Business Unit Payments, Spuerkeess, and Sofiane Hemici, Banque Raiffeisen.
Jonathan Prince started by explaining that “10 years ago, cards and cash were kings”. Today, half of the transactions in Luxembourg are driven by mobile devices. Since its creation in 2021, Digicash, which became the number 1 payment app in Luxembourg, tried to “join forces with traditional banks rather than compete with them”.
Six Luxembourg banks, including Post, BIL, BGL BNP Paribas and ING, are now part of the Digicash ecosystem. Spuerkeess was the very first one in 2012. Payconiq, also operating in Belgium and the Netherlands, took over the activities of Digicash in 2017.
Serge Wagener, Vice President & Head of Business Unit Payments, Spuerkeess, explained that when the largest retail bank in Luxembourg decided to join the initiative, the bank was mainly focused on implementing European regulations and trying to put all its services on the web banking. “But you could already see that mobile would be the platform of the future”. “What was important was the entrance towards the merchants because we have left the point of sales and Digicash had very good contacts with the merchants. In Luxembourg, most of the banks have limited their activities to the issuing services.”

For Wagener, “it was obvious that we had to bring on board all the other banks of Luxembourg because the merchants wanted a solution not for one bank only, and we are used, as a small community, to collaborate.”
Hemici (photo left) explained that Banque Raiffeisen, the last Luxembourg bank to join the initiative, wondered if it was going to offer its own solution but that in the end, they decided to trust the knowledge and experience of Payconiq.
Stijn van Brussel (photo center), COO, Payconiq, which started in Belgium in 2014, told that they needed to scale up. “If you really want to be successful in this market, one market is too small.” That’s the reason why they looked at Digicash in Luxembourg. “It was a logical step for us to create interoperability. So, a Dutch user of Payconiq can pay a friend in Luxembourg with Digicash.”
“Digital Identity an enabler for a cashless world” was the name of the presentation given by Tom Holgersson, Director of Innovation, Scale-up and Expansion, Findec Sweden’s Fintech Hub, together with Victor Waenerlund, Global Adoption Expert & Innovation Strategist, Keynote Speaker, Director of Global Projects & Digital Identity at Covr Security.
Sweden is one of the countries in the world to have moved the furthest towards a cashless society. “Services and technologies are the cornerstone to be able to be cashless”, said in introduction Tom Holgersson.
“A lot of technologies led us to where we are right now”, stated Victor Waenerlund, by retracing the path taken by Sweden, explaining for example that a company like Ericsson who built a large mobile network was one of the starting points. “But enabling a cashless society is essentially for us the bank ID, which is used by 99% of the population. It’s used across so many services, not only in banking, but in healthcare, in schools…”

Becoming a cashless society doesn't happen overnight. It is a process that has to go through different stages. You cannot impose this to the people, explained Victor Waenerlund. And in this context, “digital identity is the key enabler to anything that has to do with payments. You have to let people decide to identify themselves rather than the government identifying you”.
Waenerlund concluded his presentation with some figures : in the world, one billion people lack any form of legal ID, 3.4 billion have some form of ID, not digital, and 3.2 billion have some form of ID and digital trail. “So, there is a need to really find an ecosystem that works as a network to enable both the unidentified and the identified and people with digital trail to have access to digital financial services.”
The first morning session ended with Christophe Uzureau, Gartner Research Vice President, HBR Author, who talked about “The Real Business of Blockchain : How Leaders can create value in a new digital age”. 

“What I want to demonstrate is that in order for blockchain to make a meaningful contribution to a cashless society, we need to think about a new type of economy, so called programmable economy”: this is how Christophe Uzureau introduced his keynote. Taking the example of football and the recent European championship, he talked about the new ways to engage with fans supported by the blockchain technology: a way to improve the flexibility of issuing the tickets and improve the tracability. But much more important, blockchain technology contributed to introduce some level of programmability: when the fans get in the stadium, tracking them down, detecting fraud and the fraud patterns, providing fans more advices especially healthcare advices.
We can also see how football has created new financing models. For example, cards of football players which take the shade of NFT (non-fungible token). So, the fans become more like investors. “The next step could be using that type of new platform as a way to actually support investments into players and supporting their career.” If you see the evolution of football as a kind of illustration of the evolution of whole society, we can see that injecting probability increases participation and engagement, said Christophe Uzureau.
He then reviewed the five essential elements to the definition of a real blockchain: distribution, encryption, immutability, tokenization and decentralization.
As a conclusion, Uzureau gave his definition of what he called a programmable economy: “The programmable economy is a natively “intelligent”, economic system based on a large-scale infrastructure of distributed and decentralized digital resources that supports and/or manages the production and consumption of goods and services enabling diverse scenarios of innovation, entrepreneurship, and exchange of value (monetary and nonmonetary) among humans and machines”.

Article by Nicolas Klein (Photo Dominique Gaul)

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