The way Nick Ogden puts it, the move to establish the first new clearing bank in the UK in over two centuries came about by chance, when he asked a regulator: "Why is there no new clearing bank in the UK? Is it for political or regulatory reasons?" The regulator could not offer an answer. "And it turns out that you can't go down to the bookstore and find a book on how to set up a clearing bank," said Mr Ogden.
The erstwhile founder of Worldpay began a journey that day whose latest milestone is today's launch of ClearBank, a new "bank for banks" that now becomes the fifth such institution in London. ClearBank has no consumer facing business and will provide "regulated businesses, banks, building societies and credit unions" the means necessary to deliver their own current account services. The new bank says that it will deliver these services faster than the other clearing banks, and will additionally provide core banking services to clients, allowing them to make use of face, voice and palm biometrics.
The United Kingdom had sixteen clearing banks in the 1960s but steady consolidation has left the country with four clearing banks, which also happen to control the lion's share of the retail and corporate banking business. London's clearing system, currently controlled by the Big Four banks, is an £82 trillion business, but, like many other banks, is hobbled by legacy infrastructure.
Mr Ogden compared the potential impact of his new venture to the impact that the Aldi/Lidl business model had on the British groceries sector. Questioned by Michael Lafferty about the lack of a major British investor, Mr Ogden said that that lack was "good in a strange kind of way. We've ended up with an investment structure that is right for the bank." The management hold a 30 percent stake; the two major investors come from the Czech Republic (Petr Kellner, the billionaire insurer and financier) and Canada (John Risley, businessman and investor).
After several years of working off-radar with tech provider Microsoft and domestic regulators, the bank received its authorisation on 15 December 2016. The bank is doing stress testing on its systems and plans to be open for business and take on customers in the third quarter of this year. ClearBank is funded through the next few years, said Mr Ogden, and will not take on new funding until 2021.
ClearBank will provide clearing services for building societies, banks and regulated businesses, and aims to get new customers set up on the platform inside eight weeks. He said that all of the major networks were keen to work with the bank. ClearBank is connected to Mastercard, Visa, American Express, JCB, the Faster Payments Scheme, CHAPS and BACS. " The onboarding costs and way we engage with customers is brand new," said Mr Ogden.
He also remarked that he remained amazed at the level of cooperation from regulators and praised the BoE team, FCA, and PSR. Hannah Nixon, head of the Payments Services Regulator, said the new bank was a major achievement, adding: "It is a real first for a new organisation to gain access to all the UK payments systems at once." Ms Nixon said that with the delivery of several new banking licences, "we've got a positive picture starting to emerge".
She was followed by City minister Simon Kirby, who said the announcement was good news for the financial sector, and noted that the main reason ClearBank had received wide support across government and regulatory agencies could be summarised in one word, "competition". Mr Kirby noted that ten new banking licences had been issued in the UK.
ClearBank has built a foundational relationship with Microsoft, which will provide the infrastructure for the new institution through cloud-based services along with two physical data centres, with an emphasis on cybersecurity. "We told them what we wanted to do, and they said 'what!?'," said Mr Ogden. However, he remained confident that by using new technology — including cloud-based storage, moated data centres and several layers of biometric security — ClearBank could draw clear of the competition by providing speedy and accurate payment authentication. He noted that Microsoft had made by far the biggest investment in cybersecurity among all of the major tech businesses.
Nick Ogden's involvement in online ventures stretches back to Wine Warehouse, Britain's first-ever online shop. He was later part of the team that created WorldPay, a business now boasting four billion pounds per annum in revenue. The web address of the new firm is clear.bank.
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