Open Banking in Luxembourg

Open banking in Luxembourg

In September 2019, PSD2 went live in the EEA.Luxembourgis a globally recognised international financial huband their banks already offer open banking.
 

What is Open Banking and PSD2?

Open banking is banking practice that securely shares financial information such as consumer banking, transactions and other financial data to third-party financial service providers (Estevez, 2020). Sharing data is done through the use of application programming interfaces (APIs) and only with the consent of customers (The Balance, 2020). Open banking is the drive behind both innovation and competition in the financial industry (Cahill, n.d.). 

PSD2 is a European Directive that regulates electronic payment services, was implemented in all EEA countries in 2016 and went live in September 2019.
 

Open Banking in Luxembourg

Luxembourg is home to more than 200 fintechs with a considerable number of leading fintech companies such as Paypal and Amazon choosing Luxembourg as their european hub (Costermans, 2021; Luxembourg for Finance, n.d.). Luxembourg has a complete financial ecosystem with the whole range of services and skills necessary to develop the industry making it a globally recognised international financial hub (Gledhill, 2020). Luxembourg has a multilingual, highly skilled and educated workforce with 47% of the population being foreigners (The LHoFT, n.d.). 

Luxembourg has the goal to transition to a data-driven economy and has made progress with digital innovation. The government has taken measures to promote development and implementation of strategic digital technologies, such as AI and blockchain (DESI, 2020, 10). Furthermore, Luxembourg has developed national strategies, such as smart specialisation and data-driven innovation strategies (DESI, 2020, 10). Luxembourg is a member of the Euro High Performance Computing Joint Undertaking and has signed both the Declaration of European Blockchain Partnership and Declaration on Cooperation on Artificial Intelligence (DESI, 2020, 10). 

Luxembourg has developed an innovation agency called ‘Luxinnovation’ in order to encourage and support companies to innovate and to grow (DESI, 2020, 11). In regards to regulation, Luxembourg has chosen a tech-neutral strategy to regulating fintechs meaning new fintech startups are subject to existing regulations, which they believe is more sustainable than creating a regulatory sandbox (Schweiger, 2020). 

Of all Luxembourgish citizens using the internet, 73% use the internet for online banking, which is 7% above the EU average (DESI, 2020, 9). Additionally, on integration of digital technologies, Luxembourg ranks 19th among EU countries (DESI, 2020, 10). Furthermore, Luxembourg ranks 14th in the EU for digital public services (DESI, 2020, 12). 

Luxembourg has a total of125 banks, the largest of which includeDeutsche Bank LuxembourgandBanque Internationale à Luxembourg. 

How Does Open Banking Work?

Open banking uses an API that allows financial institutions to exchange financial data, usually through a third party-developed application (Estevez, 2020). These applications are developed by up and coming FinTech companies with the mission to improve digital banking.

To access and use the open banking APIs in Luxembourg, you will need to acquire an account information service provider license, issued by the relevant authority. Furthermore, you will require a relevant certificate (QTSPs or eIDAS), compliant with PSD2 requirements. Alternatively, you can use an open banking platform, such as Nordigen.

References

The Balance. (2020, October 11). What Open Banking Is and How It Will Affect You. https://www.thebalance.com/what-is-open-banking-and-how-will-it-affect-you-4173727

Cahill, H. (n.d.).InvoiceFair. The Evolution of Open Banking: Connectivity breeds digital competition. https://invoicefair.com/the-evolution-of-open-banking-connectivity-breeds-digital-competition-081118/

Costermans, D. (2021, May 19).Luxembourg: Luxembourg Bank And FinTech Study For 2020 - Released. Mondaq. https://www.mondaq.com/fin-tech/1069736/luxembourg-bank-and-fintech-study-for-2020--released

DESI. (2020). Luxembourg.Digital Economy and Society Index (DESI) 2020, 1-13.

Estevez, E. (2020, August 27).Open Banking. Investopedia. https://www.investopedia.com/terms/o/open-banking.asp

Gledhill, J. (2020, December).uxembourg’s banking sector: Facts & Figures. EBF. https://www.ebf.eu/luxembourg/

The LHoFT. (n.d.).Why Luxembourg. The LHoFT. https://lhoft.com/about-us/

Luxembourg for Finance. (n.d.).Fintech. Luxembourg for Finance. https://www.luxembourgforfinance.com/en/financial-centre/fin-tech/

Schweiger, M. (2020, June 25).Luxembourg: A Fintech playground with no sandbox. Loyens & Loeff. https://www.loyensloeff.com/en/en/news/news-articles/luxembourg-a-fintech-playground-with-no-sandbox-n19555/

 

 


Banks

Here is a list of major banks providing Open Banking in Luxembourg

Providers

Here is a list of major open banking platforms in Luxembourg

Nordigen

Nordigen is an authorised Account Information Service Provider. We provide free access to bank data and premium data insights, using regulated PSD2 connections.