ClearBank the first new clearing bank in 250 years
Written by Chris Lemmon
Nick Ogden, founder and former CEO of Worldpay, today unveiled ClearBank – a startup he described as “the bank for banks” – that has become the first clearing bank to enter the UK market in more than 250 years.
Gaining FCA authorisation in December, the bank is currently undergoing a pilot phase with a number of unnamed building society and credit union participants, with the target of opening its doors in autumn 2017. Financial services providers, FCA-regulated businesses and FinTechs will be able to use ClearBank to access UK payment systems and core banking technology to support current account capabilities.
ClearBank becomes only the fifth clearing bank currently in operation in the UK, joining Barclays, HSBC, Lloyds and Royal Bank of Scotland. It is the only one that does not offer services directly to the consumer and as such offers “a neutral and independent banking service to the financial services market”.
The new startup also becomes the first organisation ever to gain access to all of the UK payment systems from scratch – including Bacs, CHAPS and Faster Payments. Access to these systems is necessary for any bank or financial services provider to process payments or offer current account and sort code-based services.
Ogden commented: “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 £2 billion and £3 billion could be saved from the annual costs that are paid for transactional banking in the UK.”
Technology wise, ClearBank has partnered with Microsoft to build an API platform in accordance with ISO 20022. This API can be easily integrated into an organisation’s infrastructure, enabling access to ClearBank’s services.
At this morning’s press conference, Ogden stressed the importance of cyber security for the bank – stating that they chose to use the Microsoft Azure system because of software company’s continual investment into safeguarding data and information online ($1.5 billion every six weeks), and its 24/7 cyber security management and intervention systems in the US.
In addition, ClearBank will be deploying the latest authentication methods, with face, voice and vein biometric verification technologies. Palm biometrics read the user’s palm veins and arteries which can be used as a second form factor for authentication.
Ogden highlighted the importance of being free from the constraints of legacy technology, stating that “there are thousands of new FinTech startups and challenger banks improving choice, but the industry will never truly move forward while it is constrained by the challenges of legacy operational structures.” Built on a combination of public and private cloud infrastructure, ClearBank offers open access to payment, current account and transactional clearing services.
All of the bank’s funds will be held at the Bank of England, which has leant its support to ClearBank’s development, along with the Payment Systems Regulator and the FCA.
Charles McManus, former CFO of RBS Ulster Bank and CFO of Royal Bank of Canada, will lead the bank as CEO, and leads an executive team including: Marc Jenkins, chief financial officer; Steve Barry, chief risk officer; Andrew Smith, chief technology officer; and Philip House, chief governance officer.
Since its conception in 2014, the details of the new bank have been kept strictly confidential, with even top government officials signing non-disclosure agreements (NDAs). Ogden said: “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.”
CEO Charles McManus added: “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 have 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.”
The launch event was also attended by Simon Kirby, economic secretary to the Treasury, who added: “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.
“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.”