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Estonia’s LHV Bank prioritizes Fintechs & SMEs

The bank is slowly spreading its operations, now having set up a fully-licensed unit in the UK:

Estonia’s LHV Bank prioritizes Fintechs & SMEs

Tallinn, Estonia-based LHV Bank is uniquely focused on fintechs and SMEs. It has private individuals and institutional investors too as clients. It is the third-largest bank in Estonia and its parent company – LHV Group – is the country’s largest domestic financial group and capital provider. What is unique about the bank is its claim to be ‘fully configurable and modular’ organization, its cash-free operations and its role as a banking-as-a-service provider.

Fintechs prefer the bank because of the variety of services it offers – like real-time pound and euro payments, virtual IBANs, currency exchange accounts and FX transactions. It has some 200 plus registered fintechs as customers.

UK BANKING LICENSE

The bank had come to London in 2018 and secured its full banking license to operate in the UK in 2023. The London branch currently offers banking service and infrastructure to international financial services companies, through which the bank’s payment services reach clients worldwide.

It started catering to the SME customers in the UK in late 2022 and acquired the failed Bank North’s SME lending business. It received approval from the Financial Conduct Authority to start issuing loans in December 2022 and in May this year, it received the UK banking license without restrictions.

MODULAR PLATFORM FROM TUUM

True to its digital persona, the bank operates on a cloud-native and modular banking platform developed by Tallinn-based Tuum. Built around a microservices architecture, the platform consists of flexible and independent modules covering all retail and business banking capabilities. The platform is API-based for quick and easy integration and can run on all major cloud providers, as well as on private clouds.

The bank has been investing in other companies – it has investment in Modular Technologies of Estonia, which offers Tuum, and which it considers as a fintech; it also has capital investment Bank North.

The bank for the moment wishes to focus on the EU and the UK as it believes it can provide better and more thorough service by concentrating on this region.

What is different about the bank is that it offers a complete package of services, especially for the fintechs. It has a starter kit for financial companies and a risk framework for evaluating fintechs. It also offers cross-border financial services, which even several large European retail banks do not do now.

LOANS IN 16 DAYS

What stands apart in the case of the bank is that it has a robust balance sheet, it has ready access to capital, and there is purpose-built technology that accelerates the funding process. For example, it had completed a £1.5 million funding for a UK Group in just 16 working days.

The bank has recently been selected by Tallinn-based Montonio, an enterprise that connects payment orchestration and payment initiation into full checkout solution for European e-commerce stores, to enhancing its merchant services. The bank will use its API-driven infrastructure as the backbone for Montonio, which now can offer streamlined refund process, establishment of merchant accounts under respective merchants’ names, and improved efficiency of instant Euro payments.

Furthermore, the ability to securely segregate client funds using safeguarding accounts, and the provision of virtual IBANs (vIBANs) for merchant settlement accounts, are crucial steps towards optimizing Montonio’s merchant solutions.

Through these integrated services, Montonio will simplify its payment process from end users to merchants, improving trust and user experience. Notably, there is a two-click merchant refund mechanism, which is an operational requirement stipulated by larger e-commerce merchants.

The bank has introduced a queue management system for enhanced customer engagement. It uses Qminder QMS to manage the lines at their offices, which has reduced the wait time for customers by one-third. Today, a bank staffer can address a customer by his first name, making their experience personalized.

PLANS FOR UK

The bank has big plans for the UK. As a member of all major UK and EU payment schemes, it can now provide real-time multi-currency cloud native payments as well as broader banking infrastructure services such as current and savings accounts, acquiring, indirect scheme access, open banking, and FX services. It now plans to start accepting retail deposits and expand its banking solutions offering to e-commerce businesses, maintaining the same level of convenience, reliability, and security that the existing clients get.

Along with in-house developed applications, the bank uses third-party ones, including for AML and CRM. It proposes to use AWS as its cloud platform.

The bank has a full agency banking service catering to clients and the wider payments industry. It claims the new service provides a certified gateway to central clearing system, enabling its clients, especially fintechs, to have access to an affordable, alternative method of delivering mainstream payment processing capabilities to their end-customers.


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This article has been compiled based on publicly available information on the web, particularly the bank’s own website.

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