I recently hosted Nick Ogden, the founder of WorldPay and serial entrepreneur, at our Nordic Finance Innovation meetings in Stockholm and Oslo. Nick is now launching the first new UK clearing bank for over 250 years called ClearBank. I’d heard a few rumblings about ClearBank, but hadn’t really go the message until I saw him present the overview at our Nordic meetings.
ClearBank came into public domain at the end of February this year, as the first new clearing bank in Britain for 250 years. As Nick pointed out, historically clearing payments through BACS, CHAPS and the other national networks were controlled by a range of banks but, through consolidation, mergers and acquisitions, we have ended up in a position where only the Big 4 banks offer clearing services. The smaller banks, credit unions, building societies and FinTech start-ups therefore must rely on just these four banks to get their services through the system and, if those big banks want to play hard-ball, then you just have to roll-over and comply. That’s not a very healthy or competitive marketplace and Nick was discussing this with the regulators three years ago and just asked the question: what’s to stop a new clearing bank being created?
After discussions with the Treasury, Bank of England, Prudential Regulatory Authority (PRA) and Financial Conduct Authority (FCA), the answer came back: nothing. And that’s when he started on embarking on what is a hugely ambitious program to create the first cloud-based clearing service in the UK for centuries.
Here’s the overview:
Built with Microsoft Azure, the bank offers a simple API plugin to any third party to get access to the full UK clearing system. Here’s a brief overview of the technology stack:
Nick was telling me that they managed to keep the whole set-up under wraps with the aim of a public launch this summer but an intrepid journalist spotted, in the depths of the Bank of England’s reports, a reference to a licence being given to ClearBank and so they had to get the information out earlier. As a result, the press release was issued in February and, since then, Nick claims they have people wanting to work with them in such high demand that if they onboarded one a week they would be working relentlessly through to 2019 to get them all on board. Even today he claims they have achieved double digit market share of UK clearing which, for just a few months of operation, would be incredible if true. And it’s not just small banks and building societies that are in discussions, but even some of the largest clearing banks whose aging systems cannot handle the volumes and demands of today in the low cost, real-time network world of today that a cloud-based bank like ClearBank can.
So, purely to put the information out there, here’s the full low-down on ClearBank (according to their media relations)
ClearBank® makes UK banking history – first new clearing bank in over 250 years
- Industry milestone: First new UK bank with all funds held at the Bank of England
- Bank for banks: Designed specifically to create a new level of open competition for financial services providers, FCA-regulated businesses and Fintechs
- Unique: Only bank ever to join all UK payment schemes at once, supporting regulators to improve access to payment systems
- Technology innovation: First UK clearing bank with purpose-built, integrated core banking technology system, and API developed in accordance with ISO 20022 to support easier connection
- THE BENEFIT: Encourages market competition, making transaction banking faster and more cost effective than ever before with far-reaching consequences for financial services businesses, their customers and the wider economy
ClearBank is the first clearing bank to enter the UK market in more than 250 years. ClearBank is regulated and authorised and is on track to open its doors in Autumn 2017 to financial services providers, FCA-regulated businesses and Fintechs that require access to UK payment systems and core banking technology to support current account capabilities.
Free from the constraints of legacy technology, built on a combination of public and private cloud infrastructure, ClearBank delivers open access to payment, current account and transactional clearing services. Financial services organisations, from banks and building societies through to new challenger banks and Fintechs will be able to process payments and offer new competitive transactional banking services more cost effectively, efficiently and quickly than ever before possible.
Principal clearing banks move money between different individuals and organisations via UK payment systems such as Bacs, CHAPS and Faster Payments. They are often the only banks providing agency banking services that have full and direct access to all of the UK payments infrastructure. The majority of banks and financial services providers must use agency banking services from a clearing bank to process payments or offer current account and sort code based services.
Before ClearBank, there were four principal clearing banks: Barclays, HSBC, Lloyds and Royal Bank of Scotland. ClearBank is the fifth UK clearing bank and the only one that does not offer services direct to the consumer. As a result, it offers a truly neutral and independent banking service to the financial services market and does not compete with its own customers.
ClearBank was founded by Nick Ogden, fintech entrepreneur and founder of WorldPay, who is Executive Chairman at ClearBank. Former CFO of RBS Ulster Bank and CFO of Royal Bank of Canada Europe and Asia, Charles McManus, is ClearBank CEO and leads an executive team of high-profile industry figures including: Chief Financial Officer, Marc Jenkins; Chief Risk Officer, Steve Barry; Chief Technology Officer, Andrew Smith; and Chief Governance Officer, Philip House.
Nick Ogden, ClearBank Executive Chairman, said: “There are thousands of new fintech startups and challenger banks improving choice, but the industry will never truly move forward while it’s constrained by the challenges of legacy operational structures. ClearBank was built specifically to create competition and aims to change the market dynamics radically. Figures from the Cruickshank Report indicate that, with the improved efficiency delivered by ClearBank’s built-for-purpose technology, between £2bn and £3bn could be saved from the annual costs that are paid for transactional banking in the UK.
“We are delighted to share the result of more than three years of regulatory, operational and technology efforts, bringing true competition and a new level of transparency to UK banking. That is the ClearBank difference.”
ClearBank CEO Charles McManus, said: “There are two things that make ClearBank unique. Firstly, ClearBank is the first UK clearing bank to offer services that intentionally complement its customers’ market activities, driving choice and competition in the wider market. From our own customers through to the consumers they serve, we believe the benefits ClearBank offers will help develop greater choice, and more inclusive service offerings.
“Secondly, we’ve built ClearBank on cloud technologies from the ground up, meaning that our customers can access faster, more efficient and more cost-effective solutions and payment processing.
“It’s our mission to bring open competition, transparency and efficiency to the agency banking services market. The right technology and regulatory environment and demand for open competitive pressure now exist to support us in achieving that aim.”
Economic Secretary to the Treasury, Simon Kirby MP, said: “I am clear that UK financial services should be the most competitive and innovative in the world, which is why we are creating the right environment for new banks to enter the market.
“That is why I am so pleased to see ClearBank launch today – it will play an important role helping challenger banks access the services they need to do business, so they can compete effectively with the big players and deliver the benefits of greater choice and value for consumers and businesses.”
ClearBank’s leading edge technology platform has been built on a combination of public and private cloud infrastructure. It is specifically designed to handle core banking, clearing and settlement services, in a ground breaking partnership with Microsoft and other technology providers. Built from the ground up on Microsoft’s Azure cloud platform, and benefiting from Microsoft’s cyber security shields, ClearBank has been developed to meet the needs of the UK banking market now and in the future.
Cindy Rose, Chief Executive of Microsoft UK, said: “By embracing Microsoft’s cloud services, ClearBank is rewriting the rules on how financial services can be delivered in the UK. Through the power of Microsoft Azure, ClearBank has been able to create a robust banking infrastructure that is able to overcome substantial barriers to entry in a fraction of the time it has traditionally taken, and at minimal cost.
“Furthermore, by utilising Microsoft’s UK data centres, not only can ClearBank be confident that it has access to cloud services that offer world-class reliability and performance, it can also be assured that its data residency and regulatory requirements are fulfilled.”
ClearBank secured an investment of £25 million from PPF Group and CFFI Ventures in addition to investments from the founding management team. All members of the ClearBank team participate in a share programme.
For further information, please go to: https://Clear.Bank
The Cruickshank Report estimated that a new competitor clearing bank could save the UK economy between £2bn-£3bn per year.