LHV Pank starts development of a new business line
LHV Pank, a subsidiary of AS LHV Group, has decided to initiate a new line of business. In addition to retail banking, private banking and corporate banking, LHV will start servicing payment service providers.
According to Madis Toomsalu, CEO of LHV Group, LHV will with this step position itself even more as a new generation bank and as a link between traditional banking and new generation fintech services.
"In the coming years we can expect a rise in the business volumes of payment service providers, as the new EU Payment Services Directive, coming into force in 2018, will extend payment service providers’ rights of mediating their customers payments that use their bank accounts in the process. Payment service providers need a bank to offer their services to customers," Toomsalu explained.
The target customers of LHV’s new business line will be European payment service providers. The main product for them will be real-time payments in euros and in pounds, LHV plans to begin offering this in 2018. The service can be expanded to banks, credit brokers and other companies.
"We already service many companies that provide different payment services. For example TransferWise or Coinbase, to name a few more well-known. We have catered for payment service companies for five years already. This field of business has grown important to us and we see that it continues to grow. Our plan is to concentrate all existing and new customers that offer payment services under this new business line," said Erki Kilu, CEO of LHV Pank.
"LHV is a direct member of the Euro Payments System and we also participate in the Instant Payments System working group. Whereas many payment service providers also operate in the United Kingdom, joining the real-time Pound Payments Systems is also a high priority for us. To accomplish this we will start establishing a LHV branch in the UK, in London. After the branch is founded, it will be possible to open accounts in the Bank of England and join the Pound Payments System. Our aim is to be able to kick off our new service in 2018," Kilu explained.
In developing the new UK branch LHV will pay close attention to composing a new team. For the London office, LHV will recruit a branch manager and in addition to that customer service specialists and new employees covering compliance and money laundering prevention. LHV will also create an additional software development team based in Tallinn.
"LHV is an organization of brave ideas. We continue to concentrate on Estonian businesses and private customers, but in doing so we also want to look at the world with a wide and up-to-date perspective. Payment service providers’ business is growing and gaining significance – if we can be one of the few in the world, who will in the coming years offer both real-time euro and pound payments, we can position ourselves to benefit from this growing business. This is an investment into the future," Madis Toomsalu commented.
LHV intends to start generating income with the new branch in the second half of 2018, after the UK branch is established and joining Pound Payments System has taken place. A greater increase in revenue has been planned for following years after which the branch should become profitable. In 2017 the planned costs will mainly contain payment system accession costs and costs of developing the IT infrastructure. According to Madis Toomsalu the AS LHV Group profit prediction for 2017, disclosed in the Financial Plan in February, will remain unchanged, as the first two months of this year have generated a profit that exceeds the predictions by EUR 1 million, furthermore the tax cost of dividend payments will be lower than previously planned.
LHV Group is the largest domestic financial group and capital provider in Estonia. LHV Group's key subsidiaries are AS LHV Pank and AS LHV Varahaldus. LHV employs about 300 people and over 110,000 customers use LHV’s banking services. Pension funds managed by LHV have about 180,000 customers. Priit Rum
Communication Manager
Phone: +372 502 0786
Email: priit.rum@lhv.ee
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