LHV Bank, a leading UK-licensed financial institution, is one of Europe’s largest Banking-as-a-Service (BaaS) providers. Supporting over 200 fintech entities, including Wise and Coinbase, LHV Bank handles 8% of European real-time payments and serves over 10 million customers globally. To sustain its rapid growth and regulatory compliance, LHV Bank needed a modern core banking infrastructure.
Powering BaaS through Modern Core Infrastructure
Legacy System Constraints
LHV Bank initially operated on a legacy core banking system inherited from its parent company in Estonia. Although functional, the system lacked the flexibility, speed, and modularity essential for LHV Bank’s strategic ambitions. This shortcoming limited the bank’s ability to handle the increasing volume of transactions and rapidly expand its suite of financial products. The existing infrastructure’s inability to seamlessly support multi-entity operations further complicated efforts to sustain growth within the competitive UK financial services landscape.
Faced with these constraints, it became evident that an upgrade to a robust, independent core banking system was indispensable. Such a move was vital for facilitating high transaction volumes, streamlining the launch of new financial products, and ensuring stringent compliance with evolving UK financial regulations. Recognizing these needs, LHV Bank started its quest for a solution that not only addressed immediate operational challenges but also aligned with its ambitious long-term growth goals, ensuring enduring efficiency and compliance.
Seeking a Long-Term Technology Partner
Understanding the need for a state-of-the-art core system, LHV Bank embarked on the search for a technology partner that could offer a future-proof operational foundation. This partner would need to support LHV Bank’s extensive product development roadmap while providing the ability to swiftly adapt to regulatory changes. It was critical that this partner’s technology enabled LHV Bank to maintain a high level of control over its product offerings, ensuring that development cycles were agile, timely, and well-aligned with market demands.
In evaluating potential partners, LHV Bank prioritized modularity, scalability, and configurability—key attributes for supporting continuous innovation and growth. The chosen platform needed to allow rapid iteration and deployment of new financial services, catering to the diverse needs of fintech clients and small-to-medium-sized enterprises. Throughout this process, the bank’s underlying goal was to find a technology provider capable of delivering on both performance and compliance fronts, thereby setting up LHV Bank for sustained success in the rapidly evolving financial sector.
The Solution: Tuum’s API-First Core Banking Platform
Migrating to Tuum
LHV Bank ultimately selected Tuum’s cloud-native, API-first core banking platform. Tuum’s architecture offered the agility and configurability the bank required to fuel rapid innovation and meet its aggressive growth targets. Using Tuum’s Smart Migration approach, the transition of millions of customer accounts was completed in under two months. This streamlined process ensured that operational continuity and service quality were maintained, avoiding any disruption to the bank’s daily operations or its clients’ financial activities.
The seamless migration was a testament to both Tuum’s robust technological framework and LHV Bank’s strategic planning. Following the transition, the bank was equipped with real-time processing capabilities and a modular system that could be scaled up as its needs evolved. The platform’s API-first design enabled LHV Bank to rapidly integrate new services and products, accelerating its capacity to meet market demands. The successful deployment demonstrated that the bank was now operating on a more resilient, efficient infrastructure.
Scalability and Performance
In its first year with the new system, Tuum’s platform processed 47.7 million transactions for LHV Bank, reaffirming its performance capabilities by supporting 8% of European real-time payments. Tuum’s platform also enabled LHV Bank to expand smoothly into lending and deposit-taking activities, offering robust multi-currency and multi-entity functionalities. This scalability ensured that the bank’s infrastructure could cope with an increasing workload without compromising efficiency or speed.
LHV Bank’s ability to handle high transaction volumes and provide diverse financial services with minimal latency was a significant achievement. The platform’s scalability translated into enhanced operational capacity, allowing the bank to effectively manage larger customer bases and more complex financial transactions. This capability has set LHV Bank apart, solidifying its reputation as a leading BaaS provider capable of driving sustained innovation and growth within the financial services sector.
Ensuring Regulatory Compliance and Security
Securing the UK Banking License
Securing a UK banking license was a critical milestone for LHV Bank, underscoring its adherence to stringent regulatory standards. In 2023, Tuum played an instrumental role in this achievement by ensuring the platform’s full compliance with UK regulations. The high degree of configurability offered by Tuum’s system allowed LHV Bank to manage key business logic internally, significantly reducing dependency on external vendor support. This autonomy was crucial for maintaining compliance integrity and provided the bank with the flexibility to swiftly adapt to regulatory changes.
The regulatory compliance features of Tuum’s platform were central to LHV Bank’s success in navigating the complex financial landscape of the UK. With automated compliance checks and seamless integration with anti-money laundering (AML) and Know Your Customer (KYC) systems, the platform fortified the bank’s operational security and integrity. This ensured that the bank could focus on growth and innovation, knowing that compliance and security requirements were robustly addressed.
Managing Embedded Finance with BaaS
As an established BaaS provider, LHV Bank’s infrastructure benefits over 200 fintech partners. Tuum’s modular, API-first platform significantly simplifies the deployment of financial products, allowing fintech firms to circumvent the challenges associated with legacy systems. By offering a highly configurable and dynamic system, Tuum facilitates efficient product management and seamless alignment with regulatory requirements. This flexibility enables LHV Bank to work closely with its fintech partners, developing and launching innovative financial solutions quickly and reliably.
The ability to manage embedded finance solutions efficiently has been a game-changer for LHV Bank. With Tuum’s platform, the bank supports fintech partners in creating and delivering bespoke financial offerings, enhancing the end-user experience. This collaboration has been pivotal in driving the adoption of embedded finance across various sectors, positioning LHV Bank as a key enabler of financial innovation. By providing a robust infrastructure that supports agility and compliance, LHV Bank continues to lead the way in transforming traditional banking paradigms.
Cost Efficiency and Focus on Innovation
Streamlining IT Infrastructure
Adopting Tuum’s cloud-native platform has enabled LHV Bank to streamline its IT infrastructure, resulting in significant cost efficiencies. By transitioning to a modern, cloud-based system, the bank has reduced its reliance on outdated, maintenance-heavy infrastructure. This shift has lowered operational costs and allowed the bank to allocate resources more effectively. As a result, 75% of LHV Bank’s IT budget is now directed towards customer-focused innovation, a marked departure from the industry norm, where up to 80% of IT budgets are typically consumed by maintenance costs.
This reallocation of resources has empowered LHV Bank to prioritize the development and deployment of new financial products and services. By focusing on innovation rather than maintenance, the bank is better positioned to respond to customer needs and market trends. This proactive approach has enhanced LHV Bank’s competitive edge, allowing it to deliver cutting-edge financial solutions that meet the evolving demands of its diverse clientele.
Continuous System Optimization
Post-migration, LHV Bank has engaged in continuous system monitoring and optimization with Tuum to ensure long-term reliability and efficiency. This ongoing partnership focuses on refining and enhancing the system’s performance, addressing any emerging challenges, and implementing incremental improvements. By maintaining a proactive stance on system optimization, LHV Bank ensures that its infrastructure remains robust and capable of supporting future growth.
This commitment to continuous improvement has solidified LHV Bank’s position as a premier BaaS provider with a modern, agile foundation for ongoing innovation and market penetration. The bank’s ability to stay ahead of technological advancements and regulatory changes underscores its dedication to delivering high-quality financial services. As a result, LHV Bank is not only meeting current market demands but is also well-prepared to capitalize on future opportunities within the dynamic financial services landscape.
A Future-Proof Banking Foundation
LHV Bank, a prominent financial institution licensed in the UK, stands out as one of Europe’s largest Banking-as-a-Service (BaaS) providers. Serving over 200 fintech enterprises, including well-known names like Wise and Coinbase, LHV Bank manages 8% of all real-time payments in Europe. Moreover, it supports a global customer base of over 10 million users.
To keep up with its fast-paced growth and meet regulatory standards, LHV Bank recognized the need for a modern core banking platform. This transformation aimed to enhance its capacity to efficiently handle increasing transaction volumes and maintain robust compliance measures. The new infrastructure underpins its ability to support the complex requirements of its diverse clientele while ensuring seamless and secure banking experiences.
In essence, LHV Bank’s commitment to innovation and regulatory adherence underscores its pivotal role in the fintech ecosystem, enabling it to continuously provide high-quality banking services to millions around the globe.
