First new UK clearing bank in 250 years is launched using Microsoft technology

The UK’s first new clearing bank in more than 250 years has been launched using Microsoft technology.

Clearbank, a challenger to the Big Four incumbents, was launched on Tuesday with the aim of increasing competition in the sector and speeding up transactions, saving customers up to £3bn in costs.

As the fifth clearing bank in the country, it charges a fee to process payments and move money between individuals and organisation via systems such as BACS and CHAPS, regardless of whether or not the money originated from an account it oversees. Clearing banks give financial institutions the ability to settle payments wherever they start and end, making the process faster and more efficient. Clearbank will not offer services directly to consumers.

Founder Nick Ogden (top) hailed Clearbank as a “bank for banks”.

“This is a step change in the UK financial services market. We have developed technology that allows building societies, credit unions and banks to get immediate access to core banking services,” he said.

“There are thousands of new fintech startups and challenger banks improving choice, but the industry will never truly move forward while it’s constrained by the challenges of legacy operational structures. ClearBank was built specifically to create competition and aims to change the market dynamics radically. This represents a substantial boost to the UK economy delivering better operational processes without any impact on the way that commerce is operated in the country.”

As a digitally-focused business, Clearbank – which will be led by Charles McManus, a former Chief Financial Officer at Ulster Bank, with Ogden serving as chairman – will use Microsoft’s cloud service, Azure, as well as the technology company’s secure UK data centres.

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“We have relied on Microsoft to support us … and without that we wouldn’t be here,” Ogden added. “Microsoft is investing more in cyber security than anyone else on the planet; it’s why the Ministry of Defence sits next to us in Microsoft’s UK data centres. Our Azure hybrid model means our data centres are divorced from access to the internet. We have the ability to tune and develop our core, to set up using the best technology and services available.”

Cindy Rose, Chief Executive of Microsoft UK, said: “By embracing Microsoft’s cloud services, ClearBank is rewriting the rules on how financial services can be delivered in the UK. Through the power of Microsoft Azure, ClearBank has been able create a robust banking infrastructure that is able to overcome substantial barriers to entry in a fraction of the time it has traditionally taken, and at minimal cost.

“Furthermore, by utilising Microsoft’s UK data centres, not only can ClearBank be confident that it has access to cloud services that offer world-class reliability and performance, it can also be assured that its data residency and regulatory requirements are fulfilled.”

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Opening in the autumn, it will compete with RBS, Barclays, HSBC and Lloyds in the clearing bank space after being handed a licence by financial regulators last month. The UK government has been keen to see more challenger banks operating in order to offer more choice across the sector.

Hugh Milward, Senior Director of Corporate External and Legal Affairs at Microsoft UK, said: “London is the centre of financial services in the UK and is known across the globe as the home of some of the biggest names in banking. The launch of Clearbank shows this city and the world that technology can strengthen innovative and forward-thinking companies, and create trust in a business – a key asset in this sector. Embracing the cloud will enable financial institutions, wherever they are based, to serve their customers safer, faster, cheaper and better. There really is no safer place to build a company.”

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Clearbank is the latest large organisation to join Microsoft’s data centres in the UK, following the Ministry of Defence, the Met Police, parts of the NHS and Capita. Azure Automation was launched last month and lets customers save time and increase the reliability of administration tasks they have to complete, such as checking whether they have exceeded the size of their online database or overseeing security measures.

In December, Microsoft allowed companies and organisations to use private connections to its UK data centres. The technology firm’s partners are providing a gateway from PSN/N3 to ExpressRoute and into Azure.

The sites opened in September last year and form part of one the world’s largest online storage infrastructures, supported by more than 100 sites globally. These hold over 30 trillion pieces of data and are backed by billions of dollars in investment since 1989.