LHV Bank – Digital Banking in an Analog World October 2016

LHV Group The largest and the fastest growing domestic financial group and capital provider in Estonia the 5th largest bank in Estonia the 2nd largest pension fund manager in Estonia 2,5 EURb clients financial assets

LHV Group LHV (LHV1T) is public company listed on NASDAQ Baltic since May 2016. 5 330 shareholders 1000 subordinated bondholders 100% Estonian capital

LHV Bank A new generation bank with strong focus on innovative payment solutions and e-channels no large branch network no cash services in the branches direct member of the SEPA payments network we scale through technology

Mortgages Contactless payments ATMs Acquiring Mobile banking Multi-account cards Loyalty cards Loans & deposits Cards Payments E-banking 2009 2010 2011 2012 2013 2014 2015 2016

Partnerships Partnerships are heavily embedded into LHV DNA. Banking licence, card acquiring and issuing licence and direct link to SEPA network are enablers for LHV to work with local and global companies to build mutually innovative solutions: Issuing partnership with Kaubamaja Group Payment processing partnership with Transferwise Payment processing partnership with Coinbase Colored coin technology development LHV Bank has been highlighted as one of the emergent hybrid banks by MIT 2016 Digital Banking Manifesto.

In memoriam Banking 2000 BC – 2016?

Source: letstalkpayments.com

Why consumers adopt FinTech companies? Easy account opening – 43,4% More attractive fees – 15,4% Access to different products and services – 12,4% Better experience – 11,2% Better service quality – 10,3% More innovative products – 5,5% Greater level of trust – 1,8% Source: fintechranking.com

Why are banks lagging behind? Banking is mostly about taking credit risks Stricter regulatory environment Different financial expectations Transformation from old to new takes time and money Retail offering has mostly local focus

How to reincarnate banking? Industry is thankfully changing… Open banking and API’s – new EU Payments Directive (PSD2) Payments infrastructure improvements are in focus – SEPA Instant initiative etc. Banks exploring new technologies like blockchain More collaborative approach with FinTech companies Behind most of the successful FinTech companies there is often a traditional bank.

Cryptographic Universal Blockchain Entered Receivable

What is Cuber? Platform for real-time asset issuance, transport and redemption. Financial instruments Stocks FIAT currencies Any other physical or digital asset…

Vision „Building brick“ for next-generation financial services. Open and easily implementable API services Secure and low-cost infrastructure Bank-backed assets Compliance-in-a-box

Case study: Cuber digital wallet app First proof-of-concept project on the Cuber platform: ~7000 payment transactions with 3 merchants: ~4000 in-store payments (cafes) ~2100 self-service payments ~900 P2P payments

Thank You! Questions? LHV Pank AS, Tartu mnt 2