Working in the asset management industry and managing translations that were too urgent or too technical to be outsourced to translation agencies, the founders of Lingua Custodia felt there was a need to optimise this process and develop an effective, intelligent, user friendly and secure solution to reduce the time and resources devoted to the translation of financial documents.

The Fintech company builds machine translation engines specifically designed for the financial industry and specialised by type of document/linguistic sub-domain.

The aim is twofold: cater to the full spectrum of industry needs and achieve a superior translation quality thanks to highly domain-focused deep learning algorithms. The result: tapping into an estimated market potential of 1 billion euros in Europe alone.

More information: https://www.linguacustodia.finance 

Bigle Legal is an end-to-end document management and automation software company. The company was born in 2016 to develop an in-house technology and provide a solution to all the problems of manual paperwork management.

With Bigle Legal, users can complete the entire life cycle of a contract, in a 100% digital format, from automatic creation, real-time collaboration, contract negotiation, contract alerts, electronic signature and cloud storage. Through this system, the user gains in efficiency, while eliminating the risk of human error and obtaining traceability and absolute control of the process.

Since its origins, the company has invested more than 1 MILL euros in technology and has plans to invest another 2 MILL euros in the next 2 years, to continue growing internationally, where it already has a presence in 17 countries. In addition, it has been awarded numerous prizes for its innovation, such as last year 2020, which received the first prize of the Legal Tech Hub Vienna and the first prize of the Insurchallenge LegalTech of Santalucia Seguros

More information: https://www.biglelegal.com/

Financial technology innovation in Luxembourg has accelerated rapidly since the turn of the millennium. This growth in the use of new technologies applied to finance has been led both by players in the sector who have been established in the Grand Duchy for decades, and by new international players who have established themselves in the country in recent years to offer innovative services and generate more efficient models for the industry.

One good example in this regard is Luxembourg’s emergence as a centre for international cross-border payments. Since Paypal obtained its banking license in 2007, many other leading payments firms have chosen Luxembourg to be their EU hub. So much so that the Emerging Payments Association established its European base in Luxembourg in March 2020 to support the local and international payments sector on its unstoppable growth path. 

The Grand Duchy offers companies in this sector an excellent regulatory framework, a developing Fintech ecosystem as well as a last generation IT infrastructure.

A significant number of Fintech companies in Luxembourg focus on serving the regulatory and compliance needs of global finance: ranging from KYC and fraud detection, data management, to fund reporting and investor information tools, as well as digital investment services and online platform provision for financial services. This is complemented by an array of Fintechs, many in the B2B space covering other sectors, such as asset management, tokenisation and capital markets technology, InsurTech and more. 

In Luxembourg, The Luxembourg House of Fintech (LHoFT) is the main local body focused on the promotion and development of Fintech startups.  

Besides the LHoFT, Luxembourg is home to a number of incubators and accelerators, which help to ensure that the country stays at the vanguard of the latest technology developments in the field. They include:

• The University of Luxembourg operates its own incubator on its Belval campus in support of its entrepreneurship programme for students. 
• The House of Entrepreneurship is Luxembourg’s one-stop shop for company creation, providing assistance with business permits, tax& legal issues, as well as public funding. 
• The Luxembourg House of Start-ups (HoST), a start-up hub located in the centre of Luxembourg City, offers comprehensive support for new entrepreneurs 
• Technoport is an incubator that offers support programs for international entrepreneurs with technology-based and innovative projects.

In addition, the country offers other incubators and acceleration programs promoted by the private sector.

Recently, the Luxembourg government launched the  Startupluxembourg.com, platform to facilitate access to information for international entrepreneurs interested in setting up an innovative project from Luxembourg. This project aims to act as a coordination point for the different actors, projects and initiatives that Luxembourg is developing to support startups.

To promote innovation in the sector, Luxembourg offers a wide range of programs and activities focused on mentoring and access to financing for Fintechs. This section lists some of them, all open to the participation of international companies. These initiatives provide the ideal framework to get in depth into the Luxembourg Fintech ecosystem and identify international business and development opportunities. 

On the other hand, the country offers a favorable context for attracting global talent due to its multiculturalism and quality of life. More than 170 nationalities coexist in Luxembourg, and its citizens speak an average of 3.6 languages. Its position as one of the most important financial centers in Europe gives companies in the sector access to a network of highly qualified professionals in the field of finance. 

According to the report “Impacto, innovación y tendencias Fintech” (“Impact, innovation and Fintech trends”), prepared by the firm Finnovating last year, Spain ranks sixth in the world in the ranking of countries that host Fintech start-ups. 

With more than 400 Fintechs in Spain, the country’s ecosystem is considered to be increasingly consolidated. Not only has it carved out a niche for itself in the main Spanish cities, but its scope of action and projection is reaching ever higher levels. Although the Community of Madrid and Barcelona are at the top of the scale, other regions such as the Valencian Community, Andalusia and Galicia play an important role in this sector. 

View the Fintech Map in Spain HERE. 

Turnover in this sector exceeds 100 million euros and employs more than 5,000 workers. The verticals with the highest penetration, according to the report “Observatorio de la Digitalización Financiera Funcas – KPMG” (Financial Digitalisation Observatory Funcas – KPMG) – within the number of sub-segments included in fintech – are loans (28%), payments (19%) and investment (16%). 

Today, more than half of the customers of most Spanish banks are digital. This is proof of the transformation and consolidation process that has recently taken place in the Spanish banking business. Thus, it is estimated that 75% of Fintechs in Spain actively collaborate with companies in the traditional financial and banking sector, and it is expected that in the long term this collaboration will be even greater, according to the previously mentioned Finnovating report. 

From a regulatory point of view, on November 4th, 2020, the Spanish Senate passed the draft law for the Digital Transformation of the Financial Sector that introduces a suitable legal environment to ensure that innovation in the financial sector can be developed in an efficient and safe manner for users. In terms of regulation and supervision, it represents one of the greatest innovations made to date by the supervisory authorities, since the ultimate goal of the Spanish Sandbox will be to support the development of innovative projects under a legal and secure framework, which, due to the novelty of their business model, are unable to find a place in the current regulatory framework. 

Also, recently, the Spanish Government has presented the draft “Startup Law”, which aims to consolidate in the country a “hub” for the attraction of innovative companies, in addition to attracting talent and investment to Spain. This law contemplates measures such as the reduction of corporate tax from 25% to 15% for 4 years, deferral of tax debts, and exemptions for company stock options, among other advantages.

On June 22, Luxembourg for Finance, the Agency for the Development of Financial Centre, organised a digital event focusing on Iberia and the financial solutions offered by Luxembourg to facilitate collaboration and investment between the Iberian Peninsula and the Grand Duchy.

Luxembourg Minister of Finance, Pierre Gramengna, opened the event highlighting aspects of the recovery of the European economy post-Covid and emphasizing the solidarity of Member States in agreeing on programmes to channel the necessary funds, such as NextGenerationEU or the EU SURE program. The Minister also referred to what he called the “Triple Transition”, mentioning the green transition, the digital transition, and the transition towards a more sustainable finance as unavoidable challenges for the future.

Following the Minister’s speech, the first panel discussion brought together representatives from Bankinter, Julius Baer, Cardif Lux Vie and DLA Piper and offered diverse views on international wealth management in the current financial environment. The discussion included how Luxembourg’s innovative financial products and investment vehicles can cater for Spanish and Portuguese clients, highlighting the core features that make the Grand Duchy a center of excellence for wealth management and private banking. Regulatory aspects and the advantages that made Luxembourg life insurance one of the most recognised wealth planning solutions for international (U)HNWI’s were also addressed. Finally, echoing the words of Minister Gramengna, the panel discussed the growing importance of ESG products in wealth management.

The second panel discussion grouped representatives from Santander Asset Management, Citi Bank Europe and Arendt & Medernach. The panel discussed the solutions offered by Luxembourg for asset management and how financial players from Iberia can leverage on them to, among others, gain exposure to new asset classes, internationalise their businesses or connect with international investors. The panel also addressed the growing importance of alternative assets in the asset management arena. Similarly, the issue of sustainable finance was discussed, reviewing the latest regulatory developments at the European level and the initiatives taken by Luxembourg to reinforce their adoption. After discussing the convenience of establishing a ManCo in Luxembourg, the panelists answered questions from the audience.

The event concluded with an inspiring interview with the CEOs of Innsomnia, the Valencia-based innovation accelerator, and RegTech company Tetrao. They discussed how the solutions offered by RegTech companies facilitate compliance in the context of a growing regulatory framework. The attractiveness of Luxembourg for FinTech companies was also analysed, highlighting the strong collaboration between start-ups and traditional financial services firms – which is largely sponsored by the Luxembourg House of Financial Technology (LHoFT). They also emphasised the importance of people in enabling digital transformations and in the development of new technologies, as well as how critical attracting and retaining talent is in the sector. 

Spain was one of the first countries to establish a regulatory framework for private equity firms and their management companies through Law 1/1999. This Law was repealed following the entry into force of Directive 2011/61/EU in 2011 on European Alternative Investment Fund Managers, with the approval of Law 22/2014 (hereinafter, Private Equity Law). This law transposes the Directive in Spain and therefore includes other regulated closed-ended alternative investment entities, in accordance with the following provisions.

Types of alternative investment entities in Spain

The Venture Capital Law regulates the following closed-ended collective investment vehicles, which must be registered in the corresponding administrative register of the National Securities Market Commission (Spanish acronym “CNMV”) in order to be marketed: 

• Venture Capital Entities;
• European Venture Capital Funds, regulated by Regulation (EU) No 345/2013;
• European Social Entrepreneurship Funds, as regulated by Regulation (EU) No 346/2013; and
• Other Closed-ended type Collective Investment Entities.

Legal form, management and marketing of regulated entities

The above entities may take the form of (i) business enterprise, which are therefore subject to certain limitations of the Capital Companies Law, mainly in relation to corporate governance issues, and may choose to self-managed or delegate management to a regulated Management Company; or (ii) funds, whose assets belong to the unitholders and lack legal entity, and which must necessarily be represented and managed by a regulated Management Company. 

Regulated Management Companies may be incorporated as either a Management Company of Closed-Ended Type Collective Investment Entities or as a Management Company of Collective Investment Schemes, both of which are subject to authorisation and supervision by the CNMV. Management Companies of Closed-Ended Type Collective Investment Entities, which are mainly used in Spain for the management of venture capital projects, may choose to be authorised in accordance with the requirements of Chapter II of Title II of the Private Equity Law (this requirement will be mandatory if they have assets under management over EUR 500 million, without leverage), which entails certain additional obligations in terms of resources and supervision by the CNMV.

All Closed-Ended Type Collective Investment Entities registered with the CNMV may be marketed in Spain to investors who qualify as professional investors in accordance with the provisions of the Securities Market Law. Likewise, those Private Equity Entities managed by a Management Company of Closed-Ended Type Collective Investment Entities subject to Chapter II of Title II may be marketed in Spain to retail investors (as long as they invest a minimum of 100,000 euros and declare in writing that they are aware of the risks associated with the commitment) and, through the processing of a marketing passport with the CNMV, to professional investors in other European Union countries. European Venture Capital Funds and European Social Entrepreneurship Funds may also be marketed outside Spain within the European Union to retail investors who meet the above conditions.

Investment regime 

The Private Equity Law requires Private Equity Entities to invest at least 60% of their eligible assets in assets of their main purpose, being the taking of temporary stakes in the capital of companies: (1) which are not listed on the first stock exchange market or other equivalent regulated market (except for delisting within twelve months of the investment); (2) which are not financial institutions; and (3) which are of a non-real estate nature (although to invest in companies securities whose assets are formed for at least a 50% of real estate will be admitted, provided that the real estate representing 85% of the total book value of the real estate is assigned to the development of an economic activity). They may also extend their main purpose to invest in other venture capital companies. 

For the above purposes, financial institutions will be considered to be those included in any of the following categories (whether domestic or foreign and regardless of their legal name): credit institutions and financial credit institutions; investment services companies; insurance companies; investment, pension and security funds; management companies of collective investment, pension or security funds; institutions whose main activity is the holding of shares issued by financial institutions; mutual guarantee companies; electronic money institutions; and payment institutions.

The European Regulations governing European Venture Capital Funds and European Social Entrepreneurship Funds also establish specific limitations, including those related to the investment in financial institutions. However, the rest of the Closed-Ended Type Collective Investment Entities are not subject to investment limitations specific to the core venture capital activity that was described above.

Alternative investment: Fintech and Insurtech ecosystem

In accordance with the above, it should be highlighted that Private Equity Entities are not usually structured in Spain as vehicles for channelling investments in the financial sector (thus including all new investment activity in the Fintech and Insurtech sector). All of this without detriment to their making investments in this type of asset within their free disposal ratio and considering that the asset in which they intend to invest must be analysed on a case-by-case basis, given that some of these companies whose main activity is related to the financial sector could be excluded from the strict categorisation of financial institution.

Market operators therefore use other Closed-Ended Type Collective Investment Entities for this type of operation, which can devote all their eligible assets to investment in financial institutions, as well as unregulated structures or financial collective investment entities. Nevertheless, none of these alternatives can benefit from the special tax regime that the Spanish Corporate Income Tax Law establishes for Venture Capital Entities, which is usually one of the main reasons for setting up these structures for collective investment in company assets.

Other European jurisdictions establish fewer limitations in relation to investment in this type of assets by closed-ended type collective investment vehicles. This is the reason why some countries, are positioning themselves as leaders in this market. In this sense, we undoubtedly highlight the innumerable advantages Luxembourg offers.