The Best Banking Is No Banking — the Estonian Bank Pushing the Limits of FinTech

by Jobbatical November 06, 2017

Has a banking experience ever made you say WOW — in a good way? In Estonia, one of the world’s most advanced digital societies, one bank is showing the others how it’s done.

Farewell to brick-and-mortar banking

Founded in 1999 as an investment bank, LHV today is arguably the most innovative bank in Estonia — which, in a country known far and wide for its advances in the digital space, is saying something. I spoke to Andres Kitter, LHV Bank’s Head of Retail Banking, about the exciting developments the company is seeing (and facilitating) in the world of FinTech.

Team LHV demonstrating their agility. Photo courtesy of LHV.

As a Skype alumnus, Andres is no stranger to Estonian tech success stories and world-changing aspirations. Now in his fourth year at LHV, his ambition is to make big things happen in the payments field. “I liked the idea that banking at LHV doesn’t rely on the old-fashioned brick-and-mortar branch network,” he says of the spirit that attracted him to the team behind the smoothest banking experience in the pint-sized Baltic country.

LHV is all about user friendliness, as Andres experienced firsthand when he switched his own existing banking relationship to LHV. “The first time I logged into the internet bank, I thought, WOW — somebody has been hiding this treasure for years! It’s clear, it’s fast, built for usability.”

The smooth user journey doesn’t end (or even begin, for that matter) there. “We are the only bank providing video on-boarding,” Andres says. “People tend to open up bank accounts during lunchtime, but that’s when everyone has free time. There’s a link on our website to open an account. You’ll do a small video interview and it’s really easy.”

Not having to leave the house to open a bank account — it’s the modern consumer’s dream. LHV definitely knows its audience, and the hands-on founding team is determined to make sure that’s always the case. “They’re in touch with the industry and there are many conversations happening about the future of banking and FinTech,” Andres says.

FinTech — a world of change

With FinTech being one of the buzzwords of the century, I can’t help but ask an explain-like-I’m-five question at this point: Isn’t every bank a FinTech company by default these days? “Technically, yes, in one way or another,” Andres concedes. “But if we look at the more narrow definition of FinTech, those are slightly modern and more agile younger companies,” he elaborates.

“Maybe a few banks can be considered FinTech companies. LHV is definitely one of them. We are quite young, still very aggressively growing and agile. One thing that defines us is very close cooperation with other FinTechs.”

It’s an exciting time to operate (and cooperate) in this industry. “There are changes happening in the regulatory environment that will open up the banking infrastructure for third-party service providers,” Andres explains. “There have been significant investments into FinTech, enabling companies to provide interesting value propositions for their own customers.”

A particularly successful example of this is TransferWise, an Estonian-founded company that also happens to have its cross-border payments deeply embedded into LHV’s mobile and internet bank applications.

“There are definitely opportunities for FinTech startups that will come with the new payment services regulation,” Andres continues. “Thanks to different changes and perhaps changes in attitude, there are initiatives happening around Big Data. For example, different personal finance and budget management tools that are interesting added value on top of regular banking.”

Add to this the hive of activity around different cryptocurrency initiatives, and you’ll see that the industry is certainly booming. “We don’t know how many companies will survive,” Andres says. “But at the moment, it’s interesting to work with those companies and see what we can do together, how much we can open up our infrastructure for those companies and enable them to provide services to their own customers.”

“I really like being in an organization that is open-minded towards different partnerships with FinTech companies,” Andres says. “We’re constantly improving our own offering and the channels through which we provide services to our customers — mobile and internet banking, different card products. We act as a technology company, so we also need very good talent in-house to build the best services available.”

A bank purpose-built for usability

“Usability is one of our key considerations,” Andres emphasizes. “The bank offers opportunities to build complex consumer and business customer products. This gives our engineers and product managers a deep understanding of how to implement solutions driven by regulation or outside motivators, like how to fight money laundering and fraud. Overcoming those challenges is key to why banking is still a sexy place to work.”

Team building in the Estonian summer. Photo courtesy of LHV.

Driven by their common passion for tackling these challenges, team LHV has big plans for the future. “One of our big bets at the moment is the UK,” Andres says of the company’s expansion plans. “We’re moving quite actively to establish a branch there, specifically for servicing FinTech companies and startups. We already have a number of interesting startups and FinTechs using our banking infrastructure for payments.”

“We’re also in the process of rewriting our internet bank from scratch. Although it’s nice and beautiful, we can do better, especially compared to our mobile bank application, which has been more exciting to our customers. We’re constantly updating the mobile bank in different ways.”

Estonia — the ideal sandbox

“The best banking is no banking,” Andres tells me when I ask about LHV’s vision of the future of the industry. “That means doing all your banking activities without visiting or even noticing the bank, whether it’s payments, investments or something else. Remove the service points and it all happens fluently and your consumption points are hidden — that’s how we’d like to see the future of banking.”

Is there a better place to build such a future than Estonia, the country with Europe’s highest count of startups per capita? “Estonia is like a sandbox,” Andres enthuses. “It’s small and digitally advanced, which means that if you want to build stuff, it’s quite easy to deploy and see the customer feedback. Although the customer base is small, you can set up a working solution here. The overall technical and digital interconnection with the state and service providers helps you build interesting services. And there’s a relatively open state infrastructure in terms of the different databases of high-quality customer data.”

While the work culture here is open and innovative, Andres is the first to admit that Estonians themselves can be a strange bunch. “It’s commonly described that if you ask Estonians how they’re doing, you get a five-minute monologue about how they’re actually doing,” Andres says of his famously frank compatriots.

“They’ll probably invite you to the sauna,” he jokingly warns anyone considering working alongside Estonians. “One of my former colleagues found it very difficult to have proper conversations at the office, but after his second week at work he was invited to a sauna and was amazed that people who don’t even talk to you at the office are fully naked together.”

Winter is coming to LHV’s home town. Photo by dimbar76 via Shutterstock.

Quaint national pastimes aside, Estonia is one of the few places in the world with an environment this conducive to innovation, Andres assures me.

“Companies here are young and willing to build interesting solutions,” he concludes. “Everyone’s planning to conquer the world in one way or another.”

Written for the Jobbatical Blog by Maria Magdaleena Lamp

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