ABBL chief warns of 'significant risks' in digital payments

On Saturday, Jerry Grbic, Director of the Luxembourg Bankers' Association (ABBL), appeared on RTL Radio to discuss the risks associated with digital payments.

Grbic warned that while convenient, simple and fast digital payments carry significant risks. He referenced Grand Duke Guillaume's recent inaugural speech, agreeing that children must be taught how to use new technological tools. "Everyone needs a critical mind to question and handle these things correctly," Grbic stated, noting that fraudsters target victims of all ages and social statuses.

He suggested that the rollout of instant payment systems may have been driven by customer demand faster than the technology needed to monitor them in detail was developed.

Respect for victims of BIL fraud

Addressing a recent high-profile case, Grbic expressed "a great deal of sympathy" and respect for the at least 70 BIL customers defrauded over the summer, praising them for coming forward despite the shame victims often feel. He described the perpetrators as "professionals who knew exactly what they were doing."

Despite such professional schemes, Grbic explained that the "human element" remains the primary weak point. Banks cannot control everything, he noted, such as detecting a new IP address accessing a web banking account, especially as artificial intelligence makes fraud attempts increasingly authentic. Grbic emphasised that banks invest heavily in cybersecurity, pointing to the shutdown of 8,000 fraudulent websites in 2024 alone.

On the question of liability, the ABBL director stated that a bank would have to take responsibility if systemic vulnerabilities were found. However, if customers enter their LuxTrust details on a fake website, the bank cannot be held liable and no refund will be issued.

Spuerkeess and the Caritas affair

Grbic stated that he does not know the specific details of the case and could not confirm if the CSSF's penalty against Spuerkeess is directly linked to the Caritas affair. He emphasised that a thorough examination of the transfer procedures between Caritas and Spuerkeess would be needed before any assessment of their adequacy could be made, reiterating that he had no insider knowledge on the matter.

Commenting on recent statements by Finance Minister Gilles Roth, who said that "nothing should be off the table," including personnel consequences, Grbic offered a personal note. "I have known Ms Françoise Thoma, just to mention her, for years now, as a person of integrity," he said, concluding, "I cannot say more on the matter."

Despite the controversy, Grbic noted that the Caritas affair has served as a wake-up call for many companies to reconsider their internal governance.

Customer service and Neo-banks

Shifting to customer service, Grbic addressed criticisms about branch closures and banking fees. He explained that while banks seek to attract customers, the demand for in-person branch visits has significantly declined. He contextualised this by noting that Luxembourg has 26 branches or ATMs per 100,000 inhabitants, a figure above the EU average of 24.

The ABBL director acknowledged that competition from neo-banks like Revolut, which alone has 100,000 customers in Luxembourg, is taken seriously. He observed that for many, these digital banks serve as an alternative for faster international payments.

This competition, Grbic admitted, is "positive" as it forces conventional banks to innovate. However, he stressed that for traditional banks, the integration of new systems like AI must prioritise stability and the absolute security of customer data.

The banking and financial sector in transition

Grbic had one central message: despite a significant transformation driven by new technologies and competition, the banking sector remains vitally important to Luxembourg's economy.

Grbic underscored the sector's substantial footprint, noting that banks alone employ 26,000 people in the Grand Duchy, with the broader financial sector supporting 75,000 jobs. He highlighted its multiplier effect, calculating that for every new job created in finance, just over one additional job is created elsewhere in the national economy.

The sector's diversity is another key strength. "From normal banking services for individual customers to fintech and corporate banking, Luxembourg has it all," Grbic stated, adding that private banking for high-net-worth individuals is also growing in importance.

Addressing the sector's economic contribution, Grbic pointed out that banks and funds pay substantial taxes. When questioned on the development of niche areas within finance that may aim to reduce tax burdens, he expressed no concern. In his view, such legal financial structuring does not constitute tax evasion.

Additionally, Grbic affirmed that it is normal for banks to pursue profitability. However, he concluded by stating that the ultimate priority is trust, noting that "the worst thing that can happen to a bank is for its customers to lose confidence."