Mission possible: Structural change in Swiss banking

Crowd banking at Luzerner Kantonalbank

Stefan Lüthy

Strategy 2016 - 2020

“We are the bank of first choice” - this vision defines the objectives and scope of the strategy

08.06.2017 3

Why is LUKB addressing the “crowd issue”?

§ Lighthouse projects in the 2020@LUKB digitalisation strategy: perception as innovative and cutting-edge retail bank in German-speaking Switzerland

§ Addressing new and unknown factors§ Lab effect§ Combination of innovation and investment expertise§ Protection against substitution and basis for future earnings potential

Crowd fundingSupporting | Donating | Lending | Investing

Crowd voting

Crowd fundingInvesting

08.06.2017 4

Crowd voting

Idea of digitalising investment business not new at LUKB

08.06.2017 6

2000 2008 2010 2011 2012 2013 2014 2015 2016 2017

Pillar 1

Online trading

Pillar 2

Investment community

Pillar 3

Crowd funds

LUKB bank for investments 2.0

Introduction of investment expert system, also for non-clients on the internet(INA Web): clients can do it themselves

Asset Management Specialist develops model for electronic bank for investments: digital interactionbank – client

Start of strategy review 2016-2020

Rising demand for digital interaction (bank & client)

Rising demand for information on behaviour pattern of the clients (bank)

Financial crisis: confidence in finance industry once again shaken: clients want to judge for themselves

c5

c6

Folie 6

c5 see previous commentcorene.sullivan; 04.06.2017

c6 please reviewcorene.sullivan; 04.06.2017

LUKB stakeholders and objectives

Community

Voters

Investors

LUKB clients

§ Voters must be part of the registered community§ Investors have possibility to only

invest in the fund and do not have to be part of the community or voters§ All groups are open to both LUKB

clients and non-clients

Overview of stakeholders

o develop and successfully, sustainably operate the first real crowd voting platform, including possibility to invest (fund) in Switzerland

o become market leader in Switzerland

o as the first provider in Switzerland, create a digitalisation lighthouse vis-à-vis clients, employees and the public

o after one year: 200 crowders and 50 regular voters. fund volume > CHF 20 m (within 5 years)

LUKB objectives

08.06.2017 7

Isaac, the favoured one – women in the minority

08.06.2017 8

Crowd beats professionals – good fund performance

08.06.2017 9

Crowd funding

Facts & figures since launch of platform

§ 64 projects§ rate of success 77.8 %§ around CHF 1/2 m has been funded§ around 2,500 backers (funders)§ around 40 projects in the pipeline§ Ø age of starters: 43§ Ø funding amount at CHF 200 per funder§ Ø project duration 62 days§ Ø project target is currently CHF 10,592§ Ø number of funders per project: 53§ Ø target attainment per project: 117%

08.06.2017 11

Broadening reach by means of collaboration (primary focus: cantonal banks)

20.06.2016 13.02.2017 15.05.2017

08.06.2017 12

Conclusion

Lighthouses don’t go running all over looking for boats to save; they just stand there shining.Anne Lamott

160 years of tradition meet fintech

§ Challenges:– Existing structures– Risk assessments– Authorisation process– Speed (time to market)

§ Success factors:– Visionary drivers, “intellectual fathers” and persons responsible– Working to persuade public and repetitive communication– Letting go of the old and welcoming the new (out of the box)– Embedding in strategy

àRapid implementation in comparison to other projectsàSuccessful positioning (media, demand) of platformsàStrong learning curve and building of expertise in various areas08.06.2017 14