The financial services industry has historically lagged behind when it comes to adopting new technologies. However, in the post-COVID era, maintaining any form of competitive edge without leveraging technology has become almost impossible. Digitalisation has revolutionised the way financial services are delivered, empowering customers with convenient and accessible channels for banking. This digital transformation is already leading to increased efficiency, reduced operational costs, and improved customer experiences. Consequently, banks need to undertake specific modernisation efforts in order to shift from a sole dependence on legacy systems if they are looking to maintain or expand market share, meet security and compliance requirements, optimise cost efficiencies and attract talent.

This year’s edition of the PwC Banking Trends and Figures takes a deep dive into the state of technology within the banking sector, outlining six ways in which banks are leveraging it to shape their value proposition:

• Cloud Computing is Sparking Industry-Wide Technological Transformation
• Al is at the core of automation, personalised services and security
• Collaboration with FinTech firms is accelerating digital transformation initiatives 
• Digital solutions are enhancing customers' experience and relationships
• Banks are optimising operational efficiency through emerging technologies
• Evolution of regulatory frameworks has impacts on further technology adoption

While the report explores the convergent impacts of these trends, it also takes into account that banks’ technological transformation is not linear. Thus, it also points out five challenges that banks face in their attempts to effectively adapt to technological changes:

• Increased reliance on third-party providers could stifle business continuity
• Growing digitalisation is heightening cybersecurity and data quality risks
• Rapid?technological advancements risk customer and employee alienation
• Widespread technological transformation is intensifying market competition 
• Finding the best-fit talent will be key in banks’ market positioning

Julie Batsch, Audit Partner, Banking and Capital Markets Leader, PwC Luxembourg said:

“We envision that the advent of new technologies and the ability to harness its perks could boost the differentiation appeal of banks in Luxembourg. Further, with the evolution in regulatory frameworks that call for greater transparency and disclosure of ESG-related data, emerging technology could allow banks to adapt their digital infrastructure to gather and report on a broad range of ESG data. In this context, it is becoming increasingly clear that we have decisive times ahead and now is the time to take proactive steps.

However, with the numerous benefits these technological innovations come with, banks need to be aware of the related threats. Customers being at the centre of all this reinforces the essence of safeguarding against data security risks, privacy concerns, and the need for upskilling to adapt to exponential technological changes.

As banks swing between technology and strategy, they cannot afford to lose sight of the evolving regulations guiding the industry. The nature of banking operations exposes the sector to strict regulatory frameworks which when flouted, have huge financial and reputational implications. As various industries race to grapple with the exponential pace of technology, banks would need to transition from their legacy systems with a keen eye on the boundaries of such decisions.”

Luxembourg's Banking Sector Evolution

The second part of the report provides an analysis of the financial statements of the largest segments of banks present in Luxembourg. This review is aimed at better understanding the dynamics within the different country segments, as well as their relative developments relative to the overall Luxembourg market. As with previous iterations of the report, we have maintained the composition of the six main country segments: UK/North American, Chinese, French, Swiss, German and Luxembourg banks, which constitute our ‘home’ segment. Within each of these segments, we highlight changes and developments from the prior year and discuss observed trends.

Contact PwC Luxembourg

Julie Batsch, Audit Partner, Banking and Capital Markets Leader, PwC Luxembourg

Björn Ebert, Financial Services Leader, PwC Luxembourg

Jörg Ackermann, Advisory Partner, Banking, PwC Luxembourg

Patrice Witz, Advisory Partner, Technology Partner and Digital Leader, PwC Luxembourg