A fintech veteran spent 3 years and 'a huge amount of money' secretly building a new bank — here's how it's different

LONDON — Financial technology entrepreneur Nick Ogden on Tuesday unveiled the UK's first new, purpose-built clearing bank in 250 years after 3 years secretly working on the multi-million-pound project.

ClearBank is a "bank for banks," Ogden told a crowd in central London at Tuesday's launch event. It will not offer any services to consumers, instead offering payment processing and core banking services to fintech startups, credit unions, building societies, and other challenger banks.

ClearBank has two key propositions. Firstly, it is what's called a "clearing bank," meaning it can process payments across all major schemes in the UK, including Swift, MasterCard, Visa, CHAPS, BACS, and Faster Payments. It is only the fifth clearing bank in the UK — the others are Lloyds, Barclays, HSBC, and Royal Bank of Scotland. Any company that takes or makes payments has to work through one of these banks one way or another.

ClearBank has been purpose built using the latest technology, including Microsoft's Azure cloud, and so it claims it can offer cheaper and faster clearing services than rivals to small financial firms that need access to these payments systems.

ClearBank's second major offering is a "core banking" platform meaning credit unions and building societies can offer banking services through an "off the shelf" product rather than spending millions developing their own in-house systems. The platform includes cyber security features.

Ogden said ClearBank represents a "step change in the delivery of financial services in the UK" and "disrupts the status quo." He compared the new bank's launch to the arrival of discount retailers Aldi and Lidl in the UK supermarket sector a few years ago.

However, he said ClearBank isn't competing with the four existing clearing banks as his business is aiming to cater for smaller companies that existing banks struggle to serve profitably. He said he envisaged "healthy collaboration" with other clearing banks.

City Minister Simon Kirby spoke at Tuesday's launch event, saying it is "news worth celebrating." He added: "I can sum that up in just one word — competition."

Ogden, who cofounded ClearBank and is executive chairman, said he and his team have spent three years developing ClearBank, with input from a wide range of market players, including all the payment processing networks, the Bank of England, the Payment Systems Regulator, two of the four existing clearing banks, and Microsoft, who helped develop the technology.

The project was kept top secret "in case we failed," Ogden said. Several times in the press conference he thanked people for sticking to non-disclosure agreements and said: "We've had everyone queuing up to support us."

As well as spending a lot of time on the project, Ogden said ClearBank has invested "a huge amount of money" developing its technology, but declined to specify exactly how much. A press release on Tuesday states that ClearBank has raised £25 million from its two main backers, Czech investment billionaire Petr Kellner and Canadian entrepreneur John Risley. Management have also invested in the business and retain a 30% stake, Ogden said.

Ogden, a veteran financial technology entrepreneur, said he expects ClearBank to be his third billion-pound turnover startup. His first two were payment processing giant WorldPay, which later became part of Royal Bank of Scotland and is now listed on the FTSE 100 with a market value of £5.4 billion, and Voice Commerce Group.

ClearBank has no customers live on its platform as of yet but Ogden said the pipeline for business is "looking very interesting." The new bank is about to begin a six-month period of stress testing its network with three partners running payments through its systems. Ogden did not name them but said they were an e-money institution, a challenger bank, and a building society. Together their combined payment volumes run into the billions.

Britain has enjoyed a recent boom in new challenger banks, with Kirby saying that 10 new banks have been authorised in the last two years alone. Other notable startup banks include Monzo, Atom, Tandem, Starling, and OakNorth. Unlike ClearBank, most offer services direct to consumers or businesses.

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