An announcement last week heralded the arrival of the first new, purpose built clearing bank in the UK for some 250 years. Welcome to Clear Bank.
Fintech veteran Nick Ogden has spent many millions over the last three years developing his closely guarded secret with an impressive and wide ranging team that includes Microsoft (who helped develop the technology), the Bank of England, the Payment Systems Regulator, two of the four existing clearing banks and all of the payment processing networks.
Clear Bank is a bank for banks rather than a consumer bank, meaning that it will offer payment processing services and core banking to credit unions, building societies, fintech start-ups and other challenger banks. It has been purpose built using the latest technology (including the Microsoft Azure cloud) and has many cyber security features.
Clear Bank has two main aims, the first of which as a clearing bank is to offer payment processing services across all major schemes here in the UK such as MasterCard, Visa, Swift, CHAPS, BACS and Faster Payments. This service is currently offered by four banks: Lloyds, Barclays, HSBC and Royal Bank of Scotland; any business that takes or makes payments has to work through these four banks one way or another. Clear Bank does not want to compete with these four, it wants to offer an alternative to them for smaller businesses (who are often seen as less profitable clients by the banks due to their size), creating a “healthy collaboration” with the four existing clearing banks.
The second aim of Clear Bank is to offer a core banking platform to credit unions and building societies, meaning they can buy ‘off the shelf’ services with added cyber security features that they would otherwise have to spend millions developing in house.
Clear Bank claim that because they are a purpose built bank with the latest technological features, they can process payments and services for smaller businesses quicker and cheaper than the other four clearing banks. Odgen compares his new bank to the arrival of Aldi and Lidl on the supermarket scene here in the UK in recent years, stating he feels a “disruption to the status quo” is just what the sector needs.
What caught our eye is that whilst Mr Ogden has invested a substantial amount of his own money (although he won’t say how much), and has two key backers, the management team have also invested in Clear Bank and retain a 30% stake in the business. With a track record like Mr Ogden’s (World Pay and Voice Commerce Group being his two previous multi billion pound start-ups), who wouldn’t want to invest in the company?
As Clear Bank begin a rigorous six-month period of stress testing their network, we wait to see what response there will be from others in the sector and once up and running.
In particular, as proponents of the many good things that employee ownership can do for business, we’re wondering if Clear Bank’s ownership structure might make it stand out from the crowd in some really positive ways: businesses with significant levels of employee ownership tend to have a more informed and participative workforce and be more innovative. The inherent alignment of employees and other stakeholders in the company’s financial success can drive greater productivity and engagement too. We wonder also if Clear Bank might have employee representation at Board level, and whether its ownership structure might lead to a flatter pay structure than that endemic in most banks?
Interesting times ahead. Clear Bank is a business we will be watching.