Clearbank is eyeing up a string of new business lines after hitting profitability and taking its first steps towards international expansion.
The London-based fintech is planning to hire new staff and tap into fresh revenue streams for its next phase of growth, Emma Hagan told City AM in her first interview since becoming Clearbank’s UK chief executive this month.
“We’re still pretty bullish on the growth opportunity for Clearbank, and we always look at different opportunities to diversify and add more clients to the client base to support that continued profitability,” she said.
The firm provides clearing services and banking infrastructure to financial institutions, with Hagan claiming it had onboarded “about a third of the newly-authorised banks” from the Bank of England’s Prudential Regulation Authority.
Hagan, once chief risk officer for Silicon Valley Bank’s European arm, cited a “huge amount of demand” for Clearbank’s embedded banking products, which enable payment institutions and e-money firms to roll out banking services under Clearbank’s licence.
Clients include savings and investing app Chip, which launched a cash ISA with Clearbank earlier this year. The firm also powers payments for crypto exchange giant Coinbase and provides business bank accounts for small business fintech Tide.
“We’ve been one of the first that’s really been doing that at any kind of scale, and we’ve got near to or around a million indirect customers – SMEs and consumers – through that platform,” Hagan said.
“With the Tide relationship for example, we’ve got just over 10 per cent of the SME current account market, and through an embedded banking proposition which didn’t even exist a few years ago.”
Now the bank is looking to go further. Hagan said the firm was in the “very early stages” of exploring embedded banking in “the non-regulated space”, which would mean catering to non-financial institutions in sectors like health, travel and retail.
“There’s still quite a lot of untapped opportunity there,” Hagan said, adding that Clearbank also wanted to grow in the digital assets sector.
Hagan said Clearbank would “look to hire the specific expertise to support those business lines or to support more growth in the UK”, signalling it may buck the trend of sweeping job cuts in the wider global tech and fintech sectors.
Clearbank launched in 2017 as the UK’s first new clearing bank in 250 years. It does not lend customers’ funds and holds deposits at the central bank, meaning they are immune from the risks of a bank run.
The bank now claims to handle roughly 20m payments each month and posted its first annual profit of £18.4m in April.
Clearbank was boosted by a 20 per cent jump in deposit inflows immediately after the collapse of SVB last March as its mostly tech-sector clients fled for safety.
The UK clearing market, dominated for decades by Barclays, HSBC, Lloyds and Natwest, has become more competitive in recent years. The Bank of London became the UK’s sixth clearing bank when it launched in 2021.
That start-up has recently been under the microscope after City AM first reported that its holding company had been served a HMRC winding-up petition over unpaid taxes, just two days after its CEO stepped down.
“Whilst we look and see what people looking to the market to provide competition are up to, we’re very much focused on what we’re up to and see that as a sign of success for the market in terms of those people looking to replicate parts of our business model,” Hagan said.
Europe and beyond
In August, Clearbank said it had received an EU banking licence to expand its offering across the continent.
Hagan argued the licence would help Clearbank support cross-border activity for the many of its roughly 230 clients that operate in more than one jurisdiction.
“Opening up direct access to euro via the EU bank is particularly exciting in terms of expanding that capability and access for UK clients,” she said, also outlining a wish to launch “something similar in terms of embedded banking” in the EU market.
Moving into the US is next on Clearbank’s agenda. “Once we’re supported and feel that European expansion is bedded in and working well, then we’ll be looking at how we open up dollars and that US side of the business to provide all three of those areas of access for our client base,” Hagan said.
While Clearbank has not publicly disclosed its valuation, group CEO Charles McManus is co-chair of a “Unicorn Council” launched by fintech trade body Innovate Finance in March. The term refers to privately-held start-ups valued at more than $1bn.
In 2022, Clearbank raised £175m in a financing round led by the digital investment arm of British private equity firm Apax Partners.
Asked whether a stock market listing could be in Clearbank’s future, Hagan said: “Never say never.”
The “Unicorn Council” itself is partly focused on making the London Stock Exchange a more attractive listing venue for British tech start-ups, with Clearbank backing its slew of public policy recommendations earlier this year.
“I think our focus right now is on the expansion for the EU,” Hagan added on a potential IPO. “There’s nothing short-term for us because we’re really focusing on that as part of our strategy and execution.”