How are Luxembourg banks responding to the digital (r)evolution?

For banks, COVID-19 has been a catalyst to accelerate their digital transformation, driving them from evolving their offerings to revolutionizing their organizations. In Luxembourg, banks had to adopt new ways of working and interacting with their clients that were unthinkable less than a year ago.



Pascal Martino - {Sponsoring} Partner - Strategy & Regulatory Consulting - Deloitte

François Bade - Director - Strategy & Regulatory Consulting - Deloitte

Xavier Turquin - Senior Manager - Strategy & Regulatory Consulting - Deloitte

Published on 10 December 2020

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COVID-19 has transformed banking and fast-tracked the development of digital channels. Sixty percent of banks have closed or shortened the opening hours of their branches, but many have also implemented new digital features. These include fully digital processes, e.g., account opening (34 percent), remote identification and verification methods (23 percent) and contactless payment methods (18 percent). During the first lockdown in spring 2020, Deloitte conducted a comprehensive analysis of the banking sector’s digital capabilities and readiness and studied 318 banks across 39 countries, revealing significant gaps and opportunities. In Luxembourg, the study surveyed five major banks and revealed key findings to help banks prepare for their mandatory digital transformation.

When talking about digital banking maturity, we need to measure Luxembourg banks both globally and locally. This was the aim of Deloitte’s 2020 Digital Banking Maturity Study, a comprehensive analysis of the digital functionalities and banking market in 39 countries, encompassing 318 banks. In the country ranking, Luxembourg held its position between 2018 and 2020. On the one hand, this means the country has succeeded in following the pace but, on the other, it has stayed a digital adopter.

To achieve comparable data, country averages are based on the results of the top 5 biggest banks in given market in terms of assets. Contries within the 4 categoried are in alphabetical order - the position of the flag within the group does not imply the score against other countries from the same group.

At the banking level, the results are more disparate. While the leading Luxembourg bank has increased its maturity score by 12 points, largely by investing in and enriching its digital offering, others were unable to maintain their ranking despite increasing their maturity. This is because the pace of digitalization is accelerating globally; just maintaining current efforts is not enough. Luxembourg banks must review their digitalization programs to avoid being stuck just doing digital when others are transforming to being digital. Doing digital means using digital technologies to merely extend existing services while remaining focused on the same business, operating and customer models. For example, while customers can check the balances of their current accounts 24/7, this merely involves moving from paper to online. In comparison, being digital is optimizing business, operating and customer models to be both digital and profoundly different from prior models. For example, as property is a top concern for many Luxembourg residents, banks could offer their clients tools that perform financial health checks, create personalized plans to improve their finances, and guide them through a pre-selection of available real-estate products. Being digital is not specific to digital native banks. We found that 81 percent of these champions were actually incumbent (traditional banks). These banks have not just found a way to stay relevant to their customers but also the key to profitability. In fact, incumbent champions achieve on average a better cost-income ratio (-4.0 percentage points) and return-on-equity (+1.9 percentage points) than incumbent peers. Moving from doing digital to being digital requires a profound change at all levels of an organization. Luxembourg banks must rethink their business strategy to address this paradigm shift, because it is no longer enough to define a digital strategy; instead, banks must define a strategy in a digital world. Local banks have understood that we live in a digital era. They provide all the minimum services expected by customers;

however, despite the progress made in the past few years, there is still more to be done to achieve a better customer experience and satisfaction. In fact, most banks still need to close gaps in their end-to-end digital sales processes to better serve online customers. Only one bank in Luxembourg allows customers to open an account entirely online. Regarding daily banking, while a lot has been achieved, local banks still provide little to help their clients manage their spending and get a better overview of their financial situation. For example, banks could help their clients keep an eye on their spending by providing a forecasted account balance. To this end, in the last two years, personal finance management has been the key investment priority of digital champions. Today, more than ever, banks must find new ways to expand their relationships with their customers. The banks with the highest digital maturity have grasped this importance and have gained the biggest advantage over their peers in this area. Expanding relationship functionalities has been a top priority for digital champions, especially in partnership ecosystem and account aggregation, leading to better cross-selling opportunities within and beyond banking. The good news is that local banks have the technical and financial means to close these gaps. To become and to be digital requires changing the perception of what digital transformation is. Digital transformation means future-proofing the business, pushing companies to move from a product-centric to a client-centric business model. In other words, it is about changing the question from “How much will I save or gain by doing this?” to “How much value will I deliver to my client?”. By answering the latter question, customers can finally reconnect with their banks, increase their stickiness, and be willing to pay for value-added services. It goes without saying that client-centric companies are more profitable [1].



Banks’ profits are unequivocally down. The challenge for banks is no longer to slow down this erosion but rather to invent a new tomorrow and define what they want to become in the near future. The first step towards digital transformation is defining an ambition, the strong desire to do or to achieve something beyond what is typically considered reachable.

This ambition can be framed by answering these key questions:

  • Where to play?”, which means defining the target clients and channels. Will the organization enhance its existing customer base, look for new ways of engaging with its clients, or go even further by finding new ways of doing business?
  • How to win?” Should the firm improve its existing products and services or explore new services and assets outside its current business?

However, there are key considerations when developing an ambition:

  • Focus on the human. People are the fundamental economic gear of every business.
  • Find opportunities at the intersections. Ideas should not be standalone. The future of business is at intersections; between disciplines and domains of expertise, across departments and organizational silos, between industries, and through partnerships that span markets and geographies.
  • Getting it done is worth more than getting it perfect. In a world dominated by uncertainty, the only way to get effective market feedback is to give the market something to react to and then learning from the resulting feedback.
  • Harness the power of technology. Whether it is 5G, cloud computing, blockchain or artificial intelligence, banks must look for ways to leverage technology to drive speed-to-market or provide access to new ways of doing business.

Once defined, the ambition becomes the destination of the digital transformation journey, which involves overhauling its business, by revisiting business models and focusing on customer experiences and its culture by introducing new ways of working and building capabilities that are suited to this new reality.


Finally, with the destination defined, companies are ready to map out the road and embark on their digital transformation journey. This requires a deep understanding of current capabilities and gaps before designing the future state and achieving it. The path to digital transformation involves three main steps. How digital are we? How digital do we need to be? And, how can we get there? “It’s not the strongest, nor the most intelligent that survives. It’s the one that is most adaptable to change.” Charles Darwin.

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