"The e-banking revolution", discours de Henri Grethen à la Bureautec

At the Luxembourg International Trade Fairs
Wednesday 24th October 2001

Ladies and Gentlemen,
Distinguished Guests,

It is a pleasure for me to be with you today. I would like to thank the organisers, in particular the Belgian-Luxembourg-Nordic Countries Chamber of Commerce, for giving us the honour of organising this conference here in Luxembourg.

Yesterday you focused on the business developments for mobile services on the Internet.

Today I would like to share with you some thoughts about the role of Luxembourg in e-commerce and e-banking.

We are well aware that the tremendous increase of Internet users has induced a fabulous growth of e-commerce and e-banking in particular during the last years. M-banking and m-commerce will equally experience a strong growth in the near future.

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The Scandinavian countries have taken a leading position in the sectors of Information and Communication Technologies.

During two economic missions to Scandinavian countries, one in autumn last year and one in May this year, I had an excellent opportunity to discover the thriving and challenging developments that are taking place in the IT sector in these countries.

Nordic countries have made enormous efforts to increase the spread of Internet usage, e- and m-commerce. It is thus not surprising that they are nowadays leading the statistics concerning Internet penetration in Europe.

Scandinavian countries also have made great efforts in modernizing the underlying technical infrastructure of Internet. They are leading Europe’s broadband revolution, which will be a necessary condition for success of e-commerce as more capacity is needed to appropriately present products and services on the web.

According to recent surveys, already two-thirds of the Europeans who are online consult the Internet to get information about products to buy. Even if until now only a very low percentage of the economic transactions are concluded over the Internet, it already is a very important marketing channel.

It’s up to us, politicians and professionals, to create and promote safe conditions for transactions to be carried out on the net. Certainly, as the Nordic countries, Luxembourg has started to move in the good direction.

But let me turn more specifically to e-banking where as you will see, Luxembourg is moving in the fast lane of proactive policies to promote its development especially through our legal framework to which I will come back later.

E-banking could be one of the main beneficiaries of such an increase in consumer confidence. Actually, e-banking is already one of the services worldwide that online users take most advantage of. The amount of online bank accounts is expected to reach the number of 200 million by the end of the year 2002. 

Ladies and Gentlemen, Luxembourg is well known because of the excellence of its banking services. About 200 banks are offering their know-how, skills and services to private and corporate customers as well as investors all over the world.

Since the early eighties a transparent and forth seeing legal framework, which is continuously being modernized, has made of Luxembourg a key location for financial institutions. This legal framework and the strict control mechanisms in place guarantee a high level of security and professionalism which is a prerequisite to be able to master the challenges in our fast moving world. For the banking sector in particular, Internet is surely as much an opportunity as a major challenge.

There are not many inventions that changed the world as quickly as the World Wide Web. Every business, but especially financial markets will have to reorient business strategies towards the new possibilities offered by Internet. The Internet is breaking up old borders, changing behaviours and thus bringing about new opportunities.

As from the beginning of the ninetieth, a continuous change in investment behaviour can be recognized. More and more private investors shift from very classic forms of investments as saving accounts and bonds towards shares and investment founds.

Since the mid nineties, a new explanation for this evolution is, that the Internet opens to private customers a sheer unlimited source of online business information. Thus information was until then reserved to financial institutions or large companies.

Due to the increase of the demand, a reorganisation of the stock dealing software took place in financial institutions. Banks began to reduce transaction costs and offered services more closely targeted to the new market needs.

The strategic importance of information technology for the financial sector’s potential to automate processes is more than ever recognized. Heavy investments are necessary to modernize the mostly batch oriented processes towards modern transaction oriented platforms. This modernization is absolutely necessary to be able to offer services at the Internet speed and availability required. Without these technical efforts the enormous potentials of the Internet market could not be harvested.

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Ladies and Gentlemen, it is not enough to invest into new technologies and open a new market channel. Business models also have to be changed and banks have to reorient themselves in the new market. New strategies have to be developed, strategies that respect the potentials as well as the dangers of the Internet.

Actually, the Internet Economy moves real business closer to the neoclassic economic theories about market functioning. Due to the transparency of the market, customers can compare more easily the services of various financial institutions. On the Internet competitors are only one click away. If the customers don’t get the services they expect, they change the financial partner much more easily than in the real or physical bank business customer relation. This is especially true for stock market operations. Because of this new flexibility, financial institutions have to rethink their relationship management. They have to find strategies to keep their customers and persuade them of their excellence.

Both the potentials of the market and the possibility to reduce transaction costs by modernizing the internal processes and IT infrastructure should encourage the financial sector in investing in the new technologies.

However, Ladies and Gentlemen, we all know that e-commerce not only means considering the potentials of the market or the ways to acquire new customers and offer web-based services. It also means considering the risks that are inherent to the use of Internet as a new business strategy. Risks that are too often forgotten.

Confidentiality, integrity and authentication are very important features of the banking sector and they were very successfully managed in pre-Internet times.

Communication over an open and thus insecure channel as Internet might not be the best base for bank-client relations as trust might partially be lost.

However solutions to this problem were found with the use of asymmetric cryptography. This technique facilitates key management in insecure networks. Based on this technology a signature scheme for large networks was created. The asymmetric signature scheme was born. 

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Ladies and Gentlemen, Luxembourg is proud of its banking place and is naturally interested in its prosperity. That is the reason why Luxembourg was the first European country to implement the Directive on digital signatures.

The government is very well aware of the importance of the digital signature for e-commerce as a whole and for e-banking in particular.

Digital signature is playing a key role in the development of the Internet economy because it installs trust in this business channel. Only strong cryptographic tools and protocols can bring certainty.

For this reason I am committed to further take all necessary measures to provide confidence to the user and stimulate the e-commerce in our economy.

We are well aware, that the lack of a global infrastructure of trust on one hand and the often not yet adequate IT portfolio of the retailers on the other hand are the main reasons why e-economy isn’t growing at a faster rate.

But once again Luxembourg is working very hard to be ahead of technological advances and to strengthen its banking place. In order to implement an infrastructure of trust, seminars are organized, talks between the government, the chambers and the private market take place. Many projects and studies have been launched in the e-Luxembourg initiative.

All these efforts are done in order to fit interests of the Luxembourg e-commerce community and to give Luxembourg an infrastructure that can support and promote e-commerce initiatives.

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Luxembourg is seeking a Public Key Infrastructure (PKI) solution that is able to match the needs of all the Internet economy players especially the banking sector, which represents a flagship of the Luxembourg economy.

The PKI should guarantee the level of trust needed, be affordable and accessible to everyone. It should implement the security needs of all the e-communities as to say confidentiality, integrity, non-repudiation services and of course offering sure authentication.

We are heading for a high security solution to offer the best infrastructure we can provide. We seek interoperability with other high-security PKIs.

It is very important in fact to rely on a PKI that guarantees interoperability with other high security PKIs. A proprietary PKI can only rely on self-issued certificates. This binds the solution to the geographic area that is covered by the registration authorities of the PKI. Whereas a PKI that is interoperable can rely on every certificate that guarantees the same level of trust and follows the same certification policy. Your virtual marketplace is not restricted to a geographical area but covers the whole Internet community. A fact which for Luxembourg is very important, as we want to be present on the new digital economies map that is currently being designed.

I am very proud to confirm that Luxembourg is also undertaking many efforts in the domain of infrastructure and promotion. The percentage of schools that are online is at 100%; the average amount of pupils per Internet station is the lowest in Europe. The main telecommunication operator is modernizing our national infrastructure. In many regions customers can already go for broadband technology. Fibreglass technology is systematically installed to be able to provide services as fibre to building or even fibre to consumer.

Ladies and Gentlemen, there have been a lot of visions about what e-commerce is going to be like in the future. Some of them are quite obvious as linked to technology. Let me just cite the huge growth of mobile information, with bigger bandwidth in connections, bound and unbound as well as the growth of capacity in information processing. Small mobile terminals, which you can carry around in your purse or pocket, are soon to be more effective than the most powerful laptop computers that exist today. Multimedia, moving colour picture and the coming of virtual reality are going to give a whole new meaning to the flows of bits. Telecommunication networks are going to be replaced by intelligent networks. This will provide more services. Fixed telecommunication networks and mobile Telecommunication networks will integrate. In the future it is going to be a challenge to operate a complex network operating system.

However, I believe that countries like Luxembourg and Nordic countries, which succeed to lead the way and take the initiative to open the highway of information and communication with an accent on safety, will be rewarded. They will have a significant comparative advantage in the competition between nations for the future development of the information society.

From its inherent advantages of its light and flexible structures, Luxembourg is well armed to be part of the leading countries that give a priority to the advent of the information and knowledge society.

Ladies and Gentlemen,

I thank you for your attention.

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