FStech meets: ClearBank’s Nick Ogden
Written by Chris Lemmon
At a launch event in the City on 28 February, ClearBank was unveiled as the first clearing bank to enter the UK market in more than 250 years. FStech’s Chris Lemmon sat down with ClearBank’s founder and executive chairman Nick Ogden to find out more about the new entrant describing itself as “the bank for banks”.
You confirmed at ClearBank’s launch that Microsoft is going to be your main technology provider. What systems are you going to be using from them?
Microsoft has been involved with us on this project since 2013, so they have been deeply embedded in the development of ClearBank. We have been working with them using the Azure platform, not only in the cloud and the public environment, but in the private environment as well.
Microsoft has been building a big cyber security position globally over the past few years around the Azure platform, which is intended to provide strong perimeter systems for all of the businesses that sit within its system. There are an increasing number of financial services firms and governments who are sitting within the Azure cloud, protected by their front-end cyber security arrangements.
I was interested by the use of biometrics at ClearBank. Which different forms of biometrics will you be using?
We are using voice, facial and vein biometrics. We are also looking at fingerprints, but we are currently facing some challenges on handheld devices. Voice biometrics is key for us – it is easy and simple to use, and deployable to all because of the global distribution of smartphones.
Visual biometrics are a growing market – if you are using any of the smart computers nowadays, laptops and tablets, many of those have got retina or iris scanning capabilities built into them.
In relation to the hard authentication for our financial services customers, in the same way that we as customers of banks need to identify and secure ourselves, it is important within the institution that the people we give authority to to grant loans or overdrafts, or give permissions to for access to services, are absolutely identified. Only those people with those authorities can create access to those systems or provide those benefits.
And so, we have integrated Fujitsu vein technology, which is a small device which sits on a desk. If you are asked to sign for something, you just wave your hand over the device and it measures the veins inside your hand, which are unique to each customer. It allows us to instantly sign, identify and biometrically stamp every authority that is given by any individual within an institution that is sitting on the ClearBank network.
Will you be developing or deploying new technologies yourself or are you working with any other technology providers?
We are working very closely with Microsoft on cognitive services, and obviously we have got machine learning and some AI (artificial intelligence) running in that. We are working with Fujitsu in relation to vein technologies, and we are in discussions with another company in North America, but I am afraid that we are under a complicated NDA so we have to keep quiet on their name at the moment.
As the first new clearing bank in over 250 years, how difficult was it to connect with all of the UK payments systems?
It is like the million-piece jigsaw, where you get to the end and realise that one piece is missing. The challenge with this is that there are many people already connected to the UK payment networks. In relation to Bacs, I think we are the first new Bacs participant for over six years – so it is not something that happens every day of the week.
As a consequence of that, productisation of access to payment schemes is only just developing. And to be honest with you, I think we have helped over the course of the last two years in relation to how that all works.
I would say that it is not for the feint-hearted, it is not simple stuff. Part of the reason we developed the API interface into it all was to take away a substantial amount of pain for our customers, because it is not easy stuff to deal with.
You said at the launch that you have had an incredible amount of support from the industry, including the Payments System Regulator. That must have been a massive help…
Everyone always says at the end of a project that everybody helps, but in fact everybody helped all the way through. We engaged with all of the payment schemes, the Bank of England and all of the regulators in a massive roundtable meeting about 15 months ago, to talk through how we are actually going to make this project work. There were so many inter-related parties – all of whom were mission critical.
As a result of that meeting, we then set up monthly steering committee meetings, with everybody attending to work with us as we developed through the project. From there, we then held weekly meetings down in Thomas More Square, which is where most of the payments schemes are based, to ensure that everybody was on the same page. The issues that we came across, which were many, were dealt with and the project moved forward towards conclusion.
We were already linked into Faster Payments in January, so we have only got Bacs and CHAPS to complete. We had initially hoped to complete the CHAPS integration earlier but there were some changes to the Bank of England RTGS platform, so that is now scheduled for May.
When do you envisage a full launch for ClearBank? What is the timeline of action over the next year or so?
I would like to say now, but the reality is of course we cannot do that. Nobody has brought all of the payments schemes together and launched them in a new bank ever before – it’s the first time ever. There is an awful lot of work that has to go into ensuring all of the account systems reconciliation and reporting systems work absolutely efficiently for our customers and for ourselves. At the end of the day, we are looking after their money and we have a massive responsibility to do that correctly.
We have got three initial customers, and we are going to go through with them continuing to test the systems. We have an arrangement with the Bank of England and the FCA that we can actually test very significant payment volumes with them, so we will be doing that.
Testing spurious transactions and trying to break the system as well – it’s not just saying that we have put a few million pounds through and everything’s fine, we have to stress test the systems over the course of the next few months.
When we get back to a point of completeness, which we believe will be in the autumn, we will start to onboard some of the hundreds of organisations who have been in touch with us since we announced the launch.
Do you have a vision of where you think ClearBank will be in five years’ time?
I hope that we have developed a position in the marketplace where we are providing open access and services that make a lot of sense to smaller challenger banks, foreign banks and specifically the FinTech market.
I think that what we are trying to facilitate is change, transparency and competition – if we manage to do that and deliver that well, and we maintain and deliver exceptional customer service, then we should be a much larger business come 2022.
What makes you different to the other four clearing banks? Why would customers choose to use your services rather than theirs?
There has been no grand plan to create the position that we are in now – it’s a position of circumstance. We have come at this from a different point of view, we have come at this by saying that we need the financial bank piece but we also need the technology piece as well – and the other banks do not have that.
ClearBank has been very focused and specialised in what we provide. We are providing payments services to regulated institutions, financial services companies and FinTechs via two access routes only – either through our core banking platform or via our ISO 20022 interface. That’s all we are doing and we want to do that really well.
I think you will see a lot of legislation that kicks in in 2019, ring-fencing the retail banks to focus on their core activities to avoid the challenges that we faced in the global financial crisis. I think you will see the other banks focusing on becoming specialist in key areas, which will not compete with us and we will not compete with them, resulting in a highly complementary market.