The Bank of London has loudly launched as the sixth principal clearing bank of the UK – becoming only the second new clearing bank in more than 250 years.
Unveiled today (30 November), the bank is highly critical of pretty much everything and everyone – be it the current way of doing things, the old guard or challenger banks.
The bank enters the market with a $1.1 billion (£842.3 million) valuation, making it “the first pre-revenue bank in history to attain ‘unicorn’ status upon debut”.
Anthony Watson, Founder & Group Chief Executive of The Bank of London, says: “We’ve spent over four years working quietly in the background, bringing together veteran banking experts, leading creative innovators and visionary technologists to build, patent and validate truly game-changing technologies and innovations to transform the very fundamentals of banking.”
He notes: “Sadly, even very recent challengers have only really focused on overcoming basic and peripheral imperfections, while still subject to the full constraints of the old paradigm. They offer nothing more than incremental improvements in speed, cost, and ease-of-use. These ‘digital’ bolt-ons to analogue legacy systems are the fax machines of finance. They are not paradigm busters.”
Harvey Schwartz, Group Chairperson of The Bank of London, adds: “During the great financial crisis, I saw first-hand how the legacy payments, clearing and settlement processes that are at the heart of the global financial system contributed to bringing the world’s economies to their knees, through their inefficiencies and inherent liquidity risk.”
Watson also has words to say on the old order: “Fewer than 100 banks control the flow of money in, around, between and out of the UK, the EU and the US. Shockingly, 75% of the world’s total spendable money – just under $2.5 quadrillion [£1.87 quadrillion] – is fundamentally controlled by a small club of banks. The balance sheet risk they pose so many years after the global financial crisis is as acute as ever.”
The Bank of London’s new financing is led by ForgeLight, and follow-on investment from 14W Venture Partners and Mangrove Capital Partners, with further additional investment committed over 18 months.
It has raised $120 million (£90 million) to-date, with $90 million (£67.4 million) in this round, which places it in “the UK’s top 10 most valuable fintechs”.
While Watson and Schwartz may have strong views, they certainly have plenty of relevant experience.
Watson’s background includes Co-Founder, President & CEO of Uphold; Chair of The Labour Party’s Business & Enterprise Council; and roles at Nike, Barclays and Wells Fargo.
Schwartz has his own Wikipedia page and was President and Co-COO of Goldman Sachs until 2018. He is also on the board of SoFi, a San Francisco-based fintech company.
The Bank of London may be a new face on the UK’s tech scene but it has a lot of ambitions.
Its international growth strategy is currently underway, and the bank is in “advanced talks” with regulators in the European Union (EU) and North America (NA). The company is on track to hire over 3,000 people across the UK, EU and NA over the next five years. The majority of these hires will be initially made in the UK.
The Bank of London enters a crowded marketplace but reckons it has “three distinct market offerings”.
Firstly, it talks about its payment-versus-payment (PvP), payment-versus-delivery (PvD) and atomic settlement plans as it has some “patented innovations” to shake things up. It says the payments failure rate for banks or fintechs in mature markets such as the UK, US and EU is a “staggering” 5%, on average – per company.
Next, it has issues with global transaction banking. The bank says there are approximately 2,500 ways to price transaction banking, creating a “Gordian knot of costs” which are “almost impossible” for customers to decipher and track. It will seek to stand out by offering corporate banking products and services for businesses of all types.
Finally, the bank also has a problem with the current Platform as a Service and agency market offerings. The new entity will use its patented technologies and bank licence to offer packages of embedded financial services, from payments to cards, to multi-currency current, deposit or savings bank accounts.
The Bank of London is authorised by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority and the PRA.
The bank is headquartered in London, with offices in New York.
Prior to today’s news, the most recent clearing bank in the UK was the aptly-named ClearBank, launched in 2017. Its clients include Nationwide, Tide, OakNorth, DWP, PayPoint and Dozens.
Recognise Bank recently selected ClearBank for key account infrastructure and access to the UK’s payment schemes.