Estonian LHV will establish a new fintech focused bank in the UK

LHVs presence in London will be more prominent and the focus on the banking services even sharper.

Last month, Estonian LHV announced that they will apply for a banking license in the UK. While they are already operated in the UK with the branch, now they will have also standalone banking license in the market. Although the branch is already fully operational and provides services in the UK, they believe that a dedicated bank in the UK will better serve long term ambition and the needs of international clients. According to their press release, LHV will create a fintech focused bank in the UK.

LHV has always focussed on supporting the growing financial technology space, contrary to most banks in the Baltic region, they welcomed the fintech community with open arms and provided them with influential and important financial services, essential for their operations. LHV takes pride in being one of the first banks that publicly supported emerging virtual assets companies; standing by the money remittance companies, that always experienced trouble trying to convince banks about their compliance and AML framework suitability, and placed trust on early-stage start-ups.

Today, LHV provides banking infrastructure to more than 130 global rapidly growing financial technology, payments, and virtual assets companies. Their annualized gross-processed payment volume now exceeds 90 billion Euros and now they are constantly working to add new innovative services and widening access to payments infrastructure. LHV Connect API is one of a kind and it allows instant Euro payments via SEPA Instant and Sterling transactions through Faster Payments in the UK. Today LHV processes 8% of total the SEPA real-time transaction volume.

Why separate banking license?

According to LHV, there is three reason behind this decision:

  • Focus – a dedicated bank draws a clear line between the existing LHV’s strong retail offering in Estonia and its specialised Banking Services division, that has a global reach. The products, services and processes will be uniquely tailored to Banking Services and the product roadmap will have lesser dependencies outside of the core focus.
  • Better visibility – Retail and wholesale banking are different animals, LHV Banking Services is in its essence wholesale banking, selling services to not to individuals but large clients, such as other financial institutions, corporations and start-ups. Clear separation between the business allows for better overview over both. People familiar with the UK banking ringfencing may understandably find similarities here , but there is a need to emphasise that this decision was taken voluntarily as the board believes that in the long term it’ll help us serve our clients better. Our Banking Services clients have trusted us with more that EUR500 million (£455 million) worth of deposits, with regulated client funds safeguarding making up majority of the deposits. Safeguarding is an important topic, as it forms the basis of the trust of the non-bank financial institution and the FCA has tightened oversight over safeguarding in general. Again, LHV would rather be at the forefront and in a position to provide to the FCA, PRA and Estonian FSA better visibility over bank’s and its clients activities.
  • Value unlocking – LHV Group has three core businesses: Retail and Corporate Bank in Estonia, Asset Management and the newly established Asset Insurance. By separating the Banking Services, thereby adding an additional core business, the UK Branch will provide to LHV Group investors a better understanding of the core businesses and improves the valuation.

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