Artificial intelligence has become the dividing line between progress and obsolescence in Luxembourg’s financial industry. At both the Bloomberg Luxembourg Investment Summit and the LPEA Insights Conference, senior figures warned that firms ignoring AI do so at their peril.
Adopt or die: that’s the message from top figures in Luxembourg’s financial sector when it comes to artificial intelligence. But 50 percent of financial entities in the grand duchy do not use AI, and Europe risks falling behind.
“Traditional banks that don’t embrace AI and other technologies like DLT will likely have a limited lifespan,” CSSF director general Claude Marx said at the Bloomberg Luxembourg Investment Summit. This will be due to “growing gaps in performance, efficiency, and cost control.” And the same goes for asset managers.
So what does the situation look like amongst the grand duchy’s financial players?
According to the second edition of a CSSF survey on the use of AI in the Luxembourg financial sector, conducted together with the Central Bank of Luxembourg and released in May, 50 percent of respondents currently use or plan to use AI. Twenty-eight percent said they have concrete use cases in production or development, and 22 percent are experimenting with AI technologies.
Half do not use AI
And it’s just the beginning. For now, the top five use case categories are related to the search for and summarisation of information; process automation; chatbot and virtual assistants; text context generation; and translation. But the banking sector will see more AI use when it comes to fraud detection, credit decisions, risk management, or customer service, said Marx, while AI will increasingly be used for portfolio management and the optimisation of asset allocation decisions in asset management. Agentic AI will bring even more tools in the future.
The picture, however, is not all rosy. Half of financial entities currently use or plan to use AI, stated the report, which means that 50 percent do not plan any use of AI in the next 12 months.
There’s plenty to be concerned about when it comes to the speed of adoption of new tech more broadly. Seventy-six percent of financial entities said they had defined a digital strategy that covered technologies like AI, digital ledger technology, crypto-assets, and tokenisation, noted Marx. That means one-quarter of the surveyed firms do not have a digital strategy, a find he described as “worrying.”
A crucial shift in mindset
A change in attitude when it comes to adopting AI and other innovative technologies, therefore, is necessary. And it’s not yet the case across Luxembourg. “Tech has been the backbone of finance for decades,” said Nasir Zubairi, CEO of the Luxembourg House of Financial Technology. But “banks, financial institutions, investment funds all have to get better at technology.”
AI and new tech doesn’t just concern the IT department. “Managing innovation is an oxymoron,” said Yves Stein, CEO of Edmond de Rothschild (Europe) and chairman of the Luxembourg Bankers’ Association (ABBL). Mindsets must shift and spaces where innovative ideas can be exchanged need to be created, he added, and banks need to equip themselves in order not to become obsolete.
Challenges, such as regulation, culture, or talent attraction, do exist. Top university grads don’t want to go into banking, argued Zubairi: they prefer to go into big tech. CSSF director general Marx had a similar perspective, highlighting the need to strengthen governance in financial entities and bring tech-savvy experts to sit on the boards and C-suites of financial companies.
The financial sector needs to get better at drawing talents who really understand the tech and innovation cycle. It’s not necessarily about the technology itself, said Zubairi, but rather about how to use the technology to drive a company forward, pointing to how the pharmaceutical sector has attracted tech executives.
Shobie Ramakrishnan, who started her career at the IT services and consulting firm Infosys, is one such example. She then brought her skills to Genentech, a biotech research firm part of the Roche Group, and has been the chief digital and technology officer at the global pharmaceutical company GSK since 2021, where she has been responsible for “transforming the company’s capabilities in digital, data, and analytics,” according to GSK’s website.
Different profiles are crucial to drive the financial industry forward. Leaders of the future need to be to “inspire in terms of technology,” said Charaf El-Hami, global head of data management at the asset management firm Amundi. These are people who can connect data and business needs, who can leverage innovation, who can organise discussions at the executive level and help put in place AI strategies.
Businesses must change their mindsets. There needs to be a “reframing,” argued Zubairi, so that tech is not sidelined, but is seen as a core element of a financial player’s strategic future. Besides death and taxes, he said, change is the third inevitability in life. But many seem reluctant to embrace change. “And if we don’t adopt [AI], we will lose.”
Don’t fear AI
There are risks, like bias, discrimination, data privacy, the reliability of external solutions, and the risk of AI use to facilitate cyber and financial crime. The UK’s Financial Stability Board, moreover, has noted that the rapid adoption of AI could amplify financial sector vulnerabilities.
So is bespoke regulation for AI in finance the solution?
For Marx, the answer is an emphatic “no.” The EU already has the AI Act, which entered into force earlier this year, and financial regulatory frameworks already address risks and threats. That being said, he added, “we should monitor the adequacy of the existing framework in the coming months and years, bearing in mind two challenges: the speed of AI change and adoption; but also the lack of AI usage data in the financial sector.”
We mustn’t be afraid of AI, Marx concluded. “We are facing an economic revolution and we should embrace it.” And while the speed of transformation is “unheard of,” so is the speed of falling behind, “and Europe has already fallen behind.”