“In the morning, I have an idea. During the day, we discuss it with colleagues, and we can start implementing it the next day. Every day I go home satisfied because I know I’m working for results.” Only a few executives can afford the luxury of such flexibility and efficiency. But for Robert Schoepf, Chairman of the Board of LPB Bank, this is an everyday reality and an essential factor, thanks to which he works with healthy excitement and pleasure.
We talked to him about why small banks have a significant competitive advantage – provided they have chosen a suitable business model – and what is happening in the entire Latvian banking sector.
Just after the pandemic, there seemed to be nothing more to be afraid of. However, 2022 showed that there could also be other shocks that could significantly affect the global market: Russia’s attack on Ukraine, the energy crisis, and inflation growth. How have these events affected LPB Bank operations?
“Last year was tough. The war affected the European economy and global processes in general. All macroeconomic factors have also influenced our work. As a result of Russia’s invasion of Ukraine, the Bank reassessed its business regions, thus giving up part of the business, resulting in a decline in profit indicators. However, thanks to the professional performance of the LPB Bank team, we ended the year with growing profit indicators. Yes, the profit earned is more than half of what it was in 2021, but the Bank continues to work steadily and without losses. We successfully manage more challenging periods thanks to a business model that differs from other Latvian banks.
Fifteen years ago, when I first visited Latvia, many banks mainly profited from non-resident business. LPB Bank has always been on a different wavelength. Since 2010 we have focused on e-commerce, and I can proudly claim that we have become the first Fintech bank in Latvia. Of course, we also represent the traditional bank business: everyday services for legal and physical persons, credit programs, and payment cards. If we look at turnover and profit, almost half is Fintech, and the other half is traditional banking activity. Financial technologies are our niche, which sets us apart from other Latvian banks. We have worked in this field for a long time and do it professionally.
The average portrait of our service consumer is a licensed international payment organization to whom we offer Banking as a Service (BaaS) services. We also provide services for online stores. It is essential to mention that the large Latvian banks also operate in the e-commerce segment, but only within the country’s borders. At the same time, our services are in high demand among various European companies. I am convinced that we are unique in the Fintech field in Latvia.
When talking about the development strategy of small banks, how important is it to find your unique niche? Does it stimulate successful development or keep you afloat?
Small banks must find their niche. If they do the same thing as large banks, there is no future for such a business. Several banks have recently left the Latvian market because their business model no longer worked. This does not happen to those who have found their niche and differ from their competitors. The market always self-regulates.
Therefore, we or any other small bank, should choose a particular service or product, focus on them, and perform our work better than large banks. For us, it is the field of e-commerce and Fintech. We have found our niche, and we feel very confident in it.
What else besides financial technologies helps you stand out among other banks?
It may seem insignificant, but if you come to us, you won’t have to take a number and wait in line. On the other hand, we can afford an individual approach to each client. This applies not only to face-to-face service but to every stage of interaction with the bank. Large banks have well-developed procedures, protocols, and schemes for building cooperation – clients move through a bank-defined “corridor.”
But this applies to in-person service at the bank and every stage of client interaction. For example, we have a platform for e-commerce clients. This is our development, which we started working on 13 years ago and have been improving and adapting to the wishes of our clients every year since. It is worth highlighting and emphasizing three essential factors: a small but highly professional team, our development and our individual approach. The intersection of these factors creates a competitive advantage for our bank. Clients appreciate that we can do what they need and what increases their income, as well as the speed with which we implement their wishes. Despite its vast resources, a large bank normally can not afford the flexibility and speed we provide.
Let’s talk about the part of our traditional banking, such as lending. Each client has an individual situation, so we discuss each case separately and return to the client with an offer adapted to their needs.
Doesn’t this contradict efficiency? There is a pronounced trend towards process automation, especially in the technology company environment.
In principle, you are right, but as long as our clients want good service, we will continue to use an individual approach because the client’s wish is our main thing. Of course, we can standardize specific processes, but this will mainly concern the technical side, not customer service. If you call us, you definitely won’t run into a chatbot. Because I am deeply convinced: that high-quality customer service can only be provided if there is a natural person in front of you who knows, hears, and understands you.
Let’s talk about the future. What are the bank’s further development plans?
The market usually determines development vectors. We have already taken a big step towards the European market and will continue to do so, participating in international industry exhibitions to attract new clients. We will continue to invest in technological development: the planned investment volume for this year is 1,300,000 euros. We will supplement our IT department with talented employees to more effectively meet the needs of our bank’s clients.”
It doesn’t take a fortune teller to understand that e-commerce and Fintech are the future. Australian futurist Brett King wrote the book “Bank 3.0.: Why Banking Is No Longer Somewhere You Go But Something You Do.” Large banks are reducing the number of branches and laying off employees as IT technologies are increasingly entering this field. This process will surely go on. In 1994, Bill Gates said, “We need banking functions, not banks.” For some time now, we have observed this prophecy coming true.
In 2018, Latvia was on the verge of being included in Moneyval’s “grey list,” which could have potentially led to a downgrade of the country’s financial rating. Although Latvia was omitted, its financial prestige was significantly damaged. How do you currently assess Latvia’s image in Europe?
Indeed, Latvia has a stable banking sector. Compared to neighbouring Baltic countries, the banking sector here is more developed. Of course, there will always be people or companies with prejudices about Latvia, but I have not encountered this.
On the contrary, we are very selective concerning our clients. Out of 10 clients who come to us, we start working only with eight because we want to cooperate with clean and modern businesses oriented towards the future. We are not interested in working with those who have already been rejected everywhere; we strongly oppose “grey” money. We have strict internal controls and AML/KYC procedures, so if we are unsure about the transparency of someone’s business, this is not our client.
Latvia indeed had a not-so-good reputation in the past. But it must be said that the Latvian banking sector is now much healthier and cleaner than many people’s perception of it. Some people know what happened in Latvia 15 years ago, but they need to learn about the current situation in the sector. A lot has been done to improve the situation, with the efforts of banks, the Regulator, the Central Bank, and the state. Improving the industry is our common goal; we are moving towards it successfully, and together we will ensure that there are no dark spots on the map of the Latvian banking sector.