ClearBank, the first new clearing bank to be authorized in the UK in over 250 years launched on February 28th. This is one of the most exciting new FinTech launches with significant implications for the financial services ecosystem, though I must warn readers and openly confess to being a geek.
Whilst there has been business model innovation in FinTech segments such as payments, remittance, FX and peer to peer, these plays have focused on delivering more usable, convenient and better value propositions to consumers than incumbents, using the existing incumbent financial services infrastructure, or “rails” as we geeks like to call it.
Blockchain, Distributed Ledger, Artificial Intelligence, and Identity technologies all promise to deliver technology enabled disruption, but appear to be slow out of the starting blocks with adoptable and scalable use cases. There has not been a lot of FinTech technology ‘disruption’ in the Clayton Christensen sense of the word, that is until ClearBank.
In the UK, there are 4 clearing banks supported by a handful of industry payments schemes, run by the banks, to support the clearing of payments of all sorts: bank account payments, checks, bills, credit cards, cash machine withdrawals, mobile payments, etc.
The job of the clearing bank is to ensure that funds are delivered to the debit and credit counterparties or simply that the payment from me reaches you. Clearing is part of the plumbing in the banking system that enables the liquidity in the financial system to flow securely at a reliable and efficient pace. The majority of banks, financial services providers and fintechs must use a clearing bank to process payments or offer current account and bank sort code based services.
So why is ClearBank disruptive?
Free from the constraints of legacy technology and built on cloud infrastructure, ClearBank delivers open access to payment, current account and transactional clearing services. Regulated FinTech start-ups to incumbents will be able to access all of the UK payment schemes through a single API integration.
It is the only UK clearing bank that does not offer services direct to the consumer – a neutral and independent platform service that does not compete with its own customers. In addition to accessing all of the UK payments schemes, it is a member of Swift, and all client funds are held at the Bank of England.
FFB is a not-for-profit platform that engages different types of financial institutions of the country; assist them in their journey to reach next level