For the latest feather in its cap, the cloud-based ClearBank became the first clearing bank to offer multi-currency bank accounts via API. Partnering with JP Morgan, ClearBank will offer clients the ability to move funds between accounts through an API-based connection to JPMorgan, but this is just one step in what promises to be a period of strong growth for the firm.
Charles McManus, co-founder and CEO, ClearBank, elaborates that the acceleration of the digital agenda across financial services is occurring as a direct result of the pressures brought about by Covid-19.
“A number of institutions have had to accelerate their digital projects because they now recognise the risks they were exposed to during Covid-19, and if they wish to stay in business they must address those risks faster.”
“We’ve seen that there is an absolute arms race in terms of competition set by the likes of Revolut and Starling, and this pressure has been exacerbated by Covid-19. The financial position of banks against this backdrop has only accelerated the need to adapt or die.”
While it’s true that a number of digital transformation journeys were already well under way by the time the pandemic set in, the timeline and extent of the Covid-19 crisis has meant that banks have been forced to reassess their priorities.
“Many banks have actually closed down a number of projects that diverted resources, channelling the resources toward regulatory changes and managing Brexit pressures in conjunction with their technical and digital projects instead.”
“Banks can’t really address the digital challenges they face unless they sort out their core banking engine.”
A recent survey of senior UK banking executives by FT Focus found that up to two-thirds of respondents are planning to cut costs, while 66% are expecting to increase their automation in response to the pandemic. 60% are also expecting to increase technology spending to meet the challenges of digitalisation.
While this pressure to adapt has been profoundly challenging for financial services, ClearBank’s boon is just another slice of hard evidence that this pandemic hasn’t been terrible for everyone. 5,000 or so regulated financial institutions in the UK pushed £82 trillion worth of value through payments platforms in the UK last year, McManus explains, and of those 5,000 ClearBank currently holds 108 on their platform with another 136 at various stages of onboarding.
Since lockdown was announced in March, ClearBank has received a healthy 147 new enquiries, McManus explains that the surge is the result of legacy institutions being presented with a significant conundrum when Covid hit. Those which didn’t have digital channels were forced to close branches, their call centres were shuttered, and they simply weren’t equipped to manage demand effectively at all.
McManus comments that another factor spurring digital transformation is the abandonment of “incumbent arrogance” which historically insisted on building tech and product in house. Nowadays, the risk of building rather than buying or partnering has become too great, not only because of the time and cost, but because it weakens system resilience.
By weaving together products and partnerships - particularly via the cloud - institutions can pragmatically leverage the best expertise and speed available, strengthening their infrastructure and honing their product offering at pace with their customers’ expectations.
McManus laments the lack of choice available for clearing banks (offering agency banking) in the UK, with ClearBank one of just 5 in a tightly held clutch. He furthers that while incumbents had been allowed to get away with such poor service for such a long period, the impressive response of digitally native firms during the pandemic is finally pressuring them to make changes and provide better services.
“These institutions found that the easiest way to solve the Covid-19 challenge was to move to digital real time payments as a matter of utmost importance.”
While these digitalisation projects aren’t typically big bang transitions, the sense of urgency continues to hang thick in the air: “The demand for tech resources and talent which can operate agile APIs, ISO 20022 and cloud technology is strong. We’re all fighting for that talent and if you’re not able to secure the resources to build adequate connectivity technology, you won’t survive.”