ClearBank — a UK fintech that has built a new set of cloud-based financial rails that allows banks and other customers real-time clearance on payment transactions and other financial services — has closed a big round of funding, money it will be using to take its services beyond its home market and move into newer areas such as cryptocurrency exchanges. The company has raised £175 million ($230 million at today’s conversion rates), from a single investor, the PE firm Apax Partners.
The startup — founded in 2015 and launched in 2017 — is not disclosing its valuation, but CEO Charles McManus said that the company had prior to this raised £195 million from investors that include Canadian businessman John Risley and PE firms PPF Group and Norther Private Capital, and that its new valuation after Apax’s investment is a significant increase. PitchBook notes that as of the end of December, ClearBank’s valuation was just under £274 million, which likely puts the current valuation at $590 million at its most conservative estimate.
But the company’s current size and ambitions speaks to potentially larger numbers. Originally founded by Nick Ogden, who was also the founder of WorldPay (which Fidelity acquired for $43 billion, which was at the time the biggest deal ever made in international payments sector), ClearBank currently has 200 customers — large financial institutions and fintechs using its infrastructure to enable faster transactions — with the list including UK businesses like Tide and Oaknorth, but also international companies like Coinbase, which uses ClearBank for clearing and payments services for its UK customers. Those customers cover some 13 million bank accounts and £3 billion (nearly $4 billion) in assets.
The tech world has been awash in “fintech” for a number of years — with a wide swathe of challenger banks; businesses built on the concept of APIs and cloud computing and “embedded” financial services from third parties; artificial intelligence, personalization and mobile apps; and a number of other tech-led innovations, all corralled in the call to disrupt incumbents with new and arguably better and easier to use approaches to spending, saving and investing money. The growth of e-commerce and other services on digital platforms has further spurred that trend.
But ClearBank’s existence underscores one of the untold truths amid all of that innovation: many of these new services have been built on top of legacy infrastructure. Some companies like Stripe have built tech to get around some of the hurdles that arise as a result of this: for example, it can take typically days to reconcile and settle a transaction on traditional payment rails. Fintechs like Stripe will offer faster processes not because they have rebuilt that infrastructure, but because they have used tech to assess the overall risk of any single transaction getting rejected and is taking the calculated risk itself, charging extra fees to provide that service (and to in aggregate make money from those transactions that offsets any one of them not going through).
“Europe and and the U.S. have been very slow in modernizing,” McManus said “26 countries are only just implementing the Faster Payment scheme that the UK has had for some time. Just look at the discussions on SWIFT and cutting off Russia, and how slow that has been moving.”
The alternative is to build a new version of that infrastructure from the ground up that just works faster, which is what ClearBank says that it has done.
ClearBank describes itself as the first clearing bank to have launched in the U.K. in 250 years — the ‘big four’ that have ruled the clearing roost in the country up to now being Barclays, Lloyds, HSBC and NatWest — and its aim is to use the rails it has built to run payments services in the U.K. faster than those incumbents, and continue to expand it to more services in its home market, as well as take them abroad.
“Our aim is to provide real-time services for everything,” McManus said. As he explains it, ClearBank has built everything into one stack, which not only means that money moving is going through a single system rather than through several different channels, but also lets those plugging into its system “better visibility” into how funds are moving. “That means a greater level of comfort, visibility and faster transactions,” he said.
The company today provides banking-as-a-service to its customers both for their needs as businesses, and for them to in turn provide to their customers. It also provides links to the four main channels that are used in UK to handle payments, Faster Payments, BACS, CHAPS and direct debit.
The company launched multi currency and foreign exchange services several months ago to UK customers, and plans for the investment will include expanding that to other currencies and facilitating interbank payments, both to provide the services to existing customers that have international footprints, and to work with customers in other markets.
One of the big changes that fintech has brought is that it’s become significantly easier for non-financial companies to move into financial services, and in the bid to grow revenues and touchpoints with customers, many have. That spells opportunity for companies that are enabling that adoption.
“All companies are becoming fintech companies, and ClearBank is providing the clearing and embedded banking infrastructure for them – starting with fintechs themselves,” said Mark Beith, a partner at Apax Digital, in a statement. “We’ve seen the power of its platform first-hand, and we are excited to partner with Charles and the existing shareholders to take ClearBank global.”
ClearBank’s rise points to how, as fintech continues to mature, we’re starting to see a new generation of startups emerging that are willing to tackle that last front tier of infrastructure. Just earlier this week, a startup out of Germany called Payrails (the ambition is spelled out in its name) also launched with funding from a16z with its own ambitions to build new infrastructure to handle payments specifically for marketplace and other businesses that sit in the middle of complex transaction architectures.