BaaS Provider LHV UK Raises $38M to Pursue British Banking License

Banking-as-a-Service (BaaS) provider LHV UK has raised 30 million British pounds (about $38 million) to finance the creation of a new British bank, UK Tech News reported Tuesday (June 7).

The capital came from an oversubscribed rights issue organized by parent company LHV Group, based in Tallinn, Estonia, according to the report.

“The funds raised are a key step in the UK banking license application process,” said LHV UK CEO Erki Kilu in the report. “In tandem with this ongoing process, we continue to scale up LHV UK’s operations. We’re currently hiring vigorously for our open positions across London, Leeds and Tallinn and continue to develop new client-facing products.”

The company is waiting on regulatory approval from the Prudential Regulatory Authority (PRA) and Financial Conduct Authority (FCA), the report stated.

LHV UK has opened offices in London, Leeds and Tallinn, providing financial infrastructure for 200 FinTech and cryptocurrency companies, Coinbase, Wise and Trustly among them, according to the report. LHV is restructuring to sever its retail bank division, LHV Bank, from the FinTech-focused LHV UK.

In the past, LHV UK had relied on LHV Bank’s banking license, operating as a British branch of its parent company. The company said the move will “simplify compliance with regulatory and supervisory requirements,” the report stated.

The creation of regulatory bodies like the PRA and FCA have been crucial for the success of challenger banks in the U.K., Andy Mielczarek, co-founder and CEO of U.K.-based digital bank Chetwood, told PYMNTS earlier this year.

Read more: Chetwood CEO Calls Open Banking ‘Disappointing,’ Regulation Key to Neobank Success

However, Mielczarek’s broader argument in the interview was that opening banking in his country had been a disappointment.

“If you look at Holland, for example, the permission customers have to give to access their data is way easier, whereas the early implementations of open banking in the U.K. have felt like a phishing attack,” he said.