From left to right: Dinah Kanngiesser, Thomas Blanquier and Karishma Agarwal, Financial Services Consultants at Meliora – Management Consulting in Luxembourg. (Photo: Stats’up Luxembourg)

From left to right: Dinah Kanngiesser, Thomas Blanquier and Karishma Agarwal, Financial Services Consultants at Meliora – Management Consulting in Luxembourg. (Photo: Stats’up Luxembourg)

The banking industry in Europe has a rich history. Over time, banking activities became more formalised and transformed the entire industry. The financial crisis and the Covid-19 pandemic had a significant impact on the industry, accelerating technological trends and building a roadmap to the age of digitalisation.

The Covid-19 pandemic significantly influenced the banking market. It also emphasises digital developments cross-industries, where the US leads the way. In comparison to the 58% of US companies that act towards digital solutions, the EU follows with 46% overall. Meanwhile, Luxembourg lies behind with 42%. Nevertheless, Luxembourg had a significant level of investment in digital technologies. The Digital Economy and Society Index ranked the Grand Duchy in eighth place (DESI).

While the whole world is changing post-pandemic, the banking industry in Europe is likely to become increasingly competitive. This is not only because of the emergence of new FinTechs but also shifts in consumer tastes. These developments are expected to fuel competition and pose a threat to conventional banking models going forward.

Even though everyone had to face the Covid-19 crisis, the market in Luxembourg remained competitive. A total of EUR 77.283 billion was added to Luxembourg’s banking balance sheets as of the 30th of September 2022, bringing the country’s total balance sheet value to an impressive EUR 998.720 billion. Despite this growth, the net profit for the financial sector was EUR 2.758 billion, a decrease of EUR 0.411 billion from the previous year. While the decrease in net profit is a challenge, the balance sheet increase highlights the resilience and adaptability of the financial sector in Luxembourg.

Will Luxembourg succeed to remain competitive?

Although it is increasingly difficult to gain competitive advantages, Luxembourg has 5 good reasons to keep its strong position:

1. Attractive tax regime

2. Skilled workforce

3. Political stability and strong legal framework

4. Ideal location

5. Well-developed infrastructure

Its highly competitive tax regime and overall business-friendly climate enable financial institutions to invest in digital solutions. With its skilled workforce, Luxembourg will have the right people to assist with this transformation. In general, the change will be settled on a strong political stability and legal framework that provide safety and security by guidelines. Financial institutions that are based at the heart of Europe, have easy access to customers and business partners. In the digital sphere, Luxembourg’s well-developed infrastructure will play an important role. These favourable conditions aid banks in their digital transformation efforts.

In conclusion, the banking industry will continue to deliver innovative and efficient financial solutions as there has been a continuous effort to foster the demand for digital transformation and rapid modernisation. Banks that seamlessly integrate traditional and digital banking and adopt cutting-edge technologies can maintain their competitive edge in the modern era. By implementing digital strategies, European banks can create an environment that encourages creativity, and promote a culture of innovation, experimentation, and collaboration, enabling them to stay competitive and thrive in the digital age.

This promotional article was written by Meliora – Management Consulting, as part of the company’s membership with the Paperjam + Delano Business Club. If you wish to become a member of the Club, contact us at .

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