In innovation, we frequently talk about `Breaking Silos`, one of my favorite cross-disciplinary topics. This past weekend (unusually warm and sunny creating the temptation to be outside) I was ironing as there is no cleaning lady anymore and listening to Episode 19 of `Breaking Banks Europe`. This one was hosted by Matteo Rizzi and Spiros Margaris and with an Ecosystem Zoom into Luxembourg. And who better to discuss this with, than Nasir Zubairi, the CEO of The LHoFT– the Luxembourg House of Financial Technology.
I recalled meeting briefly Nasir for the first time at SIBOS in Geneva in September 2016, before he had given birth and baptized LHoFT. [ SIBOS size conventions may take really long to happen again if they ever happen in that globalized format.] Today we are looking at 4 years of an important ecosystem stakeholder, The LHoFT, whose role in Luxembourg has been vital. Luxembourg is like perfumes that come in small bottles and has distinct top global roles in the fund industry, in green finance, and microfinance (to name a few). As a result, Regtech is a big focus for the LHoFT, especially around anything related to funds. We can actually think of Luxembourg as a predominantly B2B fintech hub with an interest in fund administration technologies, payments (always a core component of finance), and lately blockchain for capital markets. Nasir mentioned a few names of Blockchain4Finance companies in Luxembourg during the podcast, like Tokeny, StokR, FundsDLT which are focused on Tokenization. Such companies are leading the way for the evolution of Capital markets which includes the fund industry.
FundsDLT is a homegrown initiative that I have covered before (Sep 2019) in `Two live Blockchain use cases in Mutual Funds administration and four pilots` along with Calastone and other cases. Just last month FundsDLT announced the closing of a Series A investment to develop a Decentralized platform for fund distribution. Clearstream, Credit Suisse Asset Management, and Natixis Investment Managers were the investors that joined the seed investor the Luxembourg Stock Exchange.
Nasir also highlighted The LHoFT CATAPULT 3rd cohort which is focused on African Fintechs for financial inclusion.
Catapult: Inclusion Africa 2020
Zooming out of Luxembourg as a Fintech ecosystem
Nasir`s tweet from last week about the persistent use of Fax machines in financial services, highlights that it is difficult to Break the network effects that are ingrained in financial services. Calastone confirms the challenges from the use of fax machines in fund distribution, during this global abruptly forces shift to remote working.
At #calastone we have been busy the past 3 weeks helping distributors who no longer have access to their fax setup a direct link into our network and giving them access to the TA’s and asset managers from their laptops via our EMS tool
— Louis Wright (@LouisWr96015371) April 2, 2020
The Global Fax market is growing. Part of it is on the Cloud but a significant part of it stubbornly uses standalone fax machines. Business workflows are networks that cannot be easily Broken. If your supplier, or customer, or service provider uses-requires a Fax, you will too. Breaking those networks is very hard. If we don’t manage to get rid of fax machines during this crisis, when will we?
A 2017 IDC report on the Fax market showed that 36% of fax volume (monthly pages) was sent or received using standalone fax machines, which is more than the fax volume sent or received using all other fax technologies.
The same report showed how the West (naturally) has Fax networks that stronger and more difficult to break. In North America, for example, 88% of respondents expect fax usage to grow or remain steady.
Finance is not as bad as manufacturing in terms projected usage of Fax. However, a 20% increases was projected.
The top reasons of usage and expected growth of usage are that
- Fax is an integral part of workflow – Networks
- Fax is evolving and integrateable with email – Digitalization
- Fax is secure, compliant and with a verifiable receipt – Compliance, Traceability
Culture eats software. While innovations in Regtech and Blockchain for Capital markets are advancing, those pushing these innovations are challenged by a financial world that uses Faxes for trade confirmations of all sorts of assets, fo receiving mortgage and all kinds of loan applications, processing claim forms in insurance etc.
Breaking business flow networks that operate in a certain way, is difficult.
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