Nick Ogden is, inter alia, the founder of the FTSE Worldpay and a bunch of other interesting businesses. In 2014 he created ClearBank the UK’s first clearing bank for 250yrs and is setting out to show what a modern, hi-tech clearing bank can offer existing Banks, Fintechs and Corporates.
Its mission is “to create greater competition, transparency and leading edge technology to the banking market.”
Historically the function of Clearing Banks were to clear cheques when there were hundreds of banks in the Uk and traversing the country took days.
This function expanded and now Clearing Banks clear payments of all natures – in the UK FPS, CHAPS, BACS (Direct Debits et al). Clearing banks are basically the experts at “transaction banking”.
But onto the show – how do you disrupt an oligopoly – four clearers control most of the market?
What can one get if one starts with a fresh tech stack rather than piling more on top of tops?
This topics and much more discussed on the show include:
- taking the president of the GTR owners association around the F1 track at Silverstone
- being an entrepreneur many times around
- Nick’s career journey including getting involved in the internet early in the 90s
- “23yrs ago nobody realised the internet was like an invisible tsunami coming in to attack many many industries”
- the history of cheques through to the start of electronic payments to where we are now
- “transaction banking”
- 60 clearing banks in 1960 – that was down to four before the arrival of Clear Bank
- lack of choice in FS for clearing – cf supermarkets and Lidl/Aldi (who now have 10/12% market share from zero)
- “Through the natural consolidation of clearing banks, through the challenge of the technology base that they all have, the ability then to deliver Fintech solutions, faster solutions, extend the wider competitive marketplace through access to newer technologies and new services – simply couldn’t happen with the existing structure”
- what a new clearer could offer would be potential market transformation in relation to access to services from a new supplier who is neutral and independent with no legacy
- payments is a utility service
- online banking is not revolutionary – it’s the existing service “stuck on a webpage”
- there are 400 regulated businesses in the UK that could provide current account services
- the best way forward for building societies
- as an example of new services ClearBank can give consolidated, real true and accurate views of their payments flows – this had never been done before
- a steady build-up of clients; authorised at the end of last year, launched February last year
- the problem of Fintechs trying to use banks that they were busy trying to displace in some way – ClearBank as not having any conflicts of interest in the consumer market space
- CB clients range from banks, building societies, credit unions and financial institutions from some of the very biggest globally to some of the smallest
- “we completely underestimated the market demand for change in the UK in respect to choice, neutrality and independence”
- “ClearBank is unique in that all the funds we hold for our customers sit in the Bank of England … that creates a very very stable environment for them” (hence there can never be a “run” on ClearBank unlike every other bank)
- Iceland when it collapsed
- the origins of ClearBank – “in the market we operated in there was so much friction and in FS friction = cost”
- straight-through processing has a massive impact not just on cost but also on customer satisfaction
- one millisecond to get money from Australia to the UK (and thence onto a phone and buy a coffee); so the technology works but the market doesn’t
- all their IT is in-house and the benefits of this
- the benefits of partnering with Microsoft re working with the Azure cloud esp their focus on cyber-crime and cyber-security on which they are spending $6bn per annum (more than any bank in the world)
- not using the phrase “clearing banking”, ClearBank are an agency bank which means customers consume payment services from them and use them for the benefit of their customers
- customers access via a web portal or an API
- ClearBank also offer a white-label current account solution
- “the answer’s always no unless you ask the question”
And much much more!
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