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02.28.17

First New Clearing Bank in 250 years Enters U.K. Market

There’s a newcomer on the U.K. challenger bank scene, but it’s not wooing consumers.  As a bank for banks, other FIs and fintech companies, ClearBank will offer customers access to U.K. payment systems and core banking technology to support current account capabilities.

“Financial services organizations, 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,” ClearBank says.

Nick Ogden, founder and executive chairman of ClearBank, said it “was built specifically to create competition and aims to change the market dynamics radically.”

He added: “With the improved efficiency delivered by ClearBank’s built-for-purpose technology, between £2 billion (US$2.5 billion) and £3 billion (US$3.7 billion) could be saved from the annual costs that are paid for transactional banking in the U.K.”

This is hoped to boost the U.K. economy. The launch of ClearBank was attended by the Economic Secretary to the Treasury, Simon Kirby MP, who says the government is “creating the right environment for new banks to enter the market.”

ClearBank “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,” Kirby added.

ClearBank has become the fifth clearing bank, alongside banking behemoths such as Barclays, HSBC, Lloyds and RBS, and is the only one that does not offer retail banking services. This enables ClearBank to “offer a truly neutral and independent banking service to the financial services market” and not compete with its own clients.

It says it’s to be the “only bank ever to join all U.K. payment schemes at once [Faster Payments, BACS and Chaps], supporting regulators to improve access to payment systems.”

The bank’s tech is cloud-based, build on Microsoft Azure (a combination of private and public clouds). It has a custom-built, integrated core banking system, known as ClearBank Core and an API developed in accordance with Swift’s ISO 20022 standards. All of its funds are held at the Bank of England.

In addition to investments from the founding management team, ClearBank received £25 million (US$31 million) from PPF Group and CFFI Ventures. All members of the ClearBank team participate in a share program.

The bank was three years in the making, and it “occupies a unique niche in the marketplace” as it has “no direct relation to the consumers” and offers a white-label current account platform, Ogden said during a media briefing in London on Feb. 28.

He also made much of the fact that it’s the first clearing bank in 250 years to enter the market. In 1960 there were 16 clearing banks, today there are five—“not by design but as a consequence of the market consolidating.” The bank sees itself as bringing more competition to the market.

Hannah Nixon, MD of the U.K.’s Payment System Regulator, echoed the sentiment in a brief speech praising the bank. She said it “may be the first but not the last.”

The next six months will be “fairly quiet,” according to Ogden, as ClearBank gets on with its business. Banking Technology first reported first reported on ClearBank in January.

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