Sound and sophisticated financial service

We simplify life for our customers by offering smart solutions that make our service accessible anytime and anywhere. The personal touch remains indispensable and by drawing on the great resource that our team in rural Iceland is, we are able to offer even better banking service.

Customer satisfaction comes first

We follow a clear strategy in our work - to provide first-class service and put customer satisfaction first. This has yielded results. Our own surveys show that customers are very happy with our service and, in 2023, the Bank topped the Icelandic Performance Satisfaction index for customers in the banking market for the fifth year in the row!

News of good service gets around and our customer base is growing steadily. In 2023, active customers increased by 5,500. The Bank's share in the retail market measured 40.5% at year end and has never been higher.

Banking that suits our customers’ needs

Landsbankinn’s app is the first choice among customers. We added even more features to the app in 2023 and a better banking app is hard to find, in our opinion. As the majority of our customers use the Bank’s app or other digital services and seldom or never visit a branch, it is vital to offer tech solutions that people like. We do, and there is great satisfaction with our app, as we discuss in detail in our chapter on smarter banking.

We have adapted our service to the fact that increased use of digital solutions reduces branch visits and that the service customers require in person has changed. We have shifted our focus from simple requests to consultancy and advice and enabled branch employees throughout the country to offer advice over the phone, email and remote meetings, regardless of the geographical location of the customer. This fortifies our activities around the country, allows us to equalise pressure and boost service by reducing waiting times.

Advice in rural Iceland

Over 14,000 customers made appointments with our advisors in 2023. A majority of such appointments were handled by employees in rural Iceland.

Remote advisory meetings

81%

Advice over the phone

70%

Advice in branches

38%

We closed our Austurstræti and Vesturbær branches in 2023 and opened a new branch in our headquarters at Reykjastræti 6. Opening hours were shortened in eight branches in rural Iceland. An ATM and service outlet were opened in Blönduós, where Landsbankinn has not previously operated. At the end of 2023, Landsbankinn operated 35 branches and outlets around Iceland.

More customers choose inflation-indexed mortgages

In 2023, the Central Bank of Iceland raised the policy rate four times, from 6.0% to 9.75%. Interest rates on housing mortgages grew alongside these hikes. The debt service on variable rate non-indexed loans increased considerably and significantly more than debt service on inflation-indexed loans. As a result, there was an increase in demand for inflation-indexed mortgages, both from customers applying for new loans and in refinancing transactions. At the beginning of the year, around a fourth of new housing mortgages were inflation-indexed. Towards the end of the year, the ratio had reached 55%.

Inflation-indexed loans can be expected to be more popular while interest rate levels remain high, as the debt service on such loans is lower.

Fixed rate period ends for many borrowers

When interest rates were at a low point, many customers took the opportunity to fix the rates on their non-indexed mortgages, most commonly for a three-year period. This fixed-rate period ends for a considerable number of customers in 2024, around the middle og the year or later for most.

The average amount of fixed-rate non-indexed housing mortgages (primary loans) is around ISK 24.5 million. Interest rates were commonly fixed at around 4.5%. Interest rates are much higher now, or 10.75% on the Bank’s non-indexed mortgages at year-end 2023. All things remaining equal, debt service will increase significantly once the fixed-rate period ends. Based on the average loan, the increase amounts to tens of thousands. It is to be expected that many customers will want to refinance their loans to lower debt service.

Around a third of customers with non-indexed mortgages that transitioned from fixed rates in 2023 applied for a credit assessment and refinanced their loans. Over half of the customers who refinanced did so with a new inflation-indexed loan. Around 44% of these customers took no action and their loans changed to variable rate mortgages.

Despite higher interest and inflation, customer defaults (over 90 days in arrears) remain very low. Loans in arrears were 0.2% at year-end 2023, as compared to 0.1% at the beginning of the year.

Much simpler mortgage application process

In 2023, we began working on simplification of the application process for housing mortgages. The entire process has been streamlined considerably, having regard for customers’ needs. Not long ago, applying for a mortgage loan was quite an undertaking, involving print-out of loan documents, physical signatures, various stamps and public registration of documents. The system has been simplified considerably in recent years and once the new mortgage system is launched, customers will be able to apply for housing mortgages without a single physical visit to the Bank. This is just one of the ways in which we simplify life for customers and provide even better service.

Payment deferral and cancellation of interest and indexation for Grindavík customers

We responded to the seismic and volcanic activity on the Reykjanes peninsula by offering all Grindavík customers payment deferral, that is to defer payment of instalments, interest and indexation on their housing mortgages for a period of six months. Deferred interest is added to the loan principal twelve months after the deferral period begins and deferred interest payments do not accrue interest for the first twelve months. We also cancelled interest and indexation for a period of total six months in an unusual and unprecedented action, as banks carry no legal obligation to recompense customers for damages caused by natural disaster and pricing of housing mortgages does not include the cost of such action. That being said, banks have certain scope to respond to extraordinary circumstances, if it is deemed in the interest of the bank and its customers. That was the case here.

We focused on keeping the process as simple as possible. Our Grindavík customers, who were legally domiciled and resided in the town, were contacted with the offer to defer payment and cancel interest in the app, where they could sign all necessary documents using electronic ID.

More than twice as many save in the app

Our customers continue to build their savings and customer deposits with the Bank grew by ISK 72 billion in 2023. The simplest and most fun savings method is Smart Savings in the app and, in 2023, 57% more customers had opened one or more Smart Savings accounts than in 2022.

With Smart Savings, customers get the most favourable terms available on unrestricted savings accounts and can start saving in a simple and secure manner.

Smart Savings allows customers to select different savings goals, with family being the most popular goal, followed by travel, home and vehicles. The highest amounts were saved towards the goal home in 2023. And the goals are ambitious. The average amount to reach a goal is around ISK 2 million and the time to reach the goal is 15 months on average.

Don’t save on new solutions

Following changes to the Central Bank rules on minimum fixed-term conditions for inflation-indexed bank accounts, we introduced Landsbók 12, an inflation-indexed savings account with a 12-month restricted term. The account has been well received.

Among other changes was the option to order withdrawal from premium rate accounts in the app, which was previously only possible in online banking or by contacting the Customer Service Centre or branch. We also introduced text message alerts for deposits to bank accounts through Landsbankinn’s app, making it easier for customers to monitor their accounts.

Opening of the open banking system at Landsbankinn

“In recent years, we have poured a lot of effort, time and funds into implementation of the PSD2 directive in the Bank's operation. PSD2 is intended to open the banking system by requiring banks and other credit institutions to allow third-party service provider access to their customers’ payment accounts, with their consent of course.

The result of this hard work is showing across the Bank. We have renewed and updated many older systems - “under the hood” work that customers generally don’t see.

Our aim was to ensure that our customers also notice that the Bank is a pioneer in this field. We did this by enabling our customers to view their bank accounts with other banks and transfer to and from these accounts in Landsbankinn’s app. All you need now is our app, even though you also hold accounts with other banks. We launched this feature in July 2023, in effect opening the open banking system in Iceland - at Landsbankinn.

We are very happy to have achieved this milestone and hope that our success will encourage others to take advantage of the wide-ranging opportunities the open banking system affords. I can envision fintechs building apps for large department stores that allow customers to pay directly from their bank accounts, without having to use payment cards. Airlines could also do something similar.

The banks currently accessible through Landsbankinn’s app are Arion Bank, Íslandsbanki and Kvika. We look forward to welcoming other banks and savings banks to our app as soon as they are ready.

The option to view and make transfers from accounts with other banks gives customers a better overview of their finances, which is one of our goals. In 2023, we also introduced the option for customers to grant others view and transfer access to their bank accounts. This makes it exceedingly easy for spouses to let each other view their balance and transfer from accounts. Sharing access to finances is very important for spouses in my opinion - it simplifies life and helps people plan and manage their spending.

Implementation of PSD2 has been a comprehensive and expensive undertaking that has resulted in various benefits for the Bank going forward. Our customers will experience these benefits through even better service and more efficient operation.”

Cybercrime proves the importance of education and preventative measures

Since 2016, we have put concerted effort into warning against the risk of cybercrime and fraud, through accessible educational material and other means. We have hosted several informative events and our experts have been visible participants in media discussion about the subject. There was considerable cybercrime activity in 2023, mostly based on fraudulent email or text messages that trick people to divulge their payment card information or use electronic ID to give the cybercriminals access to customers’ app or online banking accounts. We responded in various ways and, as the year progressed, the frequency of these offences fell.

In 2023, we hosted six seminars on cybersecurity, including in collaboration with the Senior Citizens’ Society of Akureyri, the Icelandic Organization of the Visually Impaired. Our expert on cybercrime prevention appeared in the media several times and published articles to both our website and news outlets. The volume of cybercrime in 2023 demonstrated the importance to remain vigilant and we will continue to emphasise cybercrime prevention.

Moderate growth in payment card turnover

Payment card turnover with Landsbankinn’s customers increased by 13% between years. The increase is driven mostly by inflation and growing customer numbers.

Icelanders clearly travelled a lot during the year, as non-domestic card use increased even more, or by 17% between years. Ecommerce with non-domestic platforms grew rather more, or around 21%.

Aukakrónur customers are happier!

Aukakrónur is one of the country’s strongest benefit systems. Surveys show that Aukakrónur are very popular, both among our customers and partners. Customers who use Aukakrónur are both more satisfied and more loyal.

Customers easily accrue Aukakrónur when they use their credit cards with our partners. A record was set in both the collection and use of Aukakrónur in 2023. Landsbankinn’s customers collected 570 million Aukakrónur and, for the first time ever, they purchased goods and services with our partners for a higher amount than was collected during the year, or for 608 million Aukakrónur. Use is up by 16% between years and one of the reasons is that in late 2022, Aukakrónur became available in phones, making it much simpler for customers to use their Aukakrónur.

Collection

Aukakrónur

570

Use

Aukakrónur

608

Partners

200+

all over the country

Customers collect Aukakrónur on all domestic turnover and also receive a discount in the form of Aukakrónur from our partners. Our partners number more than 200. Working with our partners, we started an offer of the month campaign for our Aukakrónur customers in 2023.

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