The Bank of London, which announces itself as the world's first purpose-built global clearing, agency and transaction bank, launches today.
The new bank, which has offices in London and New York, is the UK’s sixth principal clearing bank and has “a mission to lift communities and power the borderless economic infrastructure of the future.”
A press release states that The Bank of London is “led by an executive team of industry pioneers and a board of renowned global leaders [and] enters the market with a US$1.1 billion valuation, making it the first pre-revenue bank in history to attain 'unicorn' status upon debut.” Further details provided include the following:
- Having received its first bank licence as the sixth principal clearing bank of the UK – TBoL is only the second new clearing bank in more than 250 years
- 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
- Raising US$120m to-date, with US$90m in this round, immediately ranks the bank in the UK's top 10 most valuable fintechs
- As part of its international growth strategy currently underway, 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. Most of these hires will be initially made in the UK
Four years in the planning
“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,” said Anthony Watson, TBoL’s founder & group chief executive.
“We leverage our leading-edge proprietary technology innovations and differentiated bank capabilities to remove unnecessary risk, unlock liquidity and deliver revolutionary products and services at significantly lower costs to enable near instant settlement without a financial intermediary in the flow of funds.”
Harvey Schwartz, TBOL’s group chairperson, added: “The Bank of London is going to address an arcane part of the global financial system – the sleepy worlds of clearing and global transaction banking. I was honoured to spend 21 years of my career at one of the leading financial institutions, retiring from Goldman Sachs in 2018 as president and co-chief operating officer.
“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. Fundamentally, banking is basically an immensely complex data problem. TBoL is the solution. And our unique solution is simplicity.”
Three market offerings
In its press release, TBoL states that it enters the marketplace with three distinct market offerings:
- Global Clearing & Settlement – The global financial system is at a tipping point. The arcane global payments infrastructure: domestic and cross-border payments, clearing and settlement schemes and networks are the critical, if not well understood, cornerstone of the global financial system. But they’re costly, fractured, and friction layered – messaging, payments, and liquidity are all on different rails – encumbered by a chain of correspondent banks, exacerbated further by the systemic risk of liquidity intermediation and failed payment inefficiencies.
TBoL addresses the principal risk factors across payments, clearing, liquidity and settlement – in-country, in-region, and cross-border allowing, for the first time, the continuous transfer, with near-instant irrevocable settlement finality, and the immediate availability of funds disbursement: 24/7, 365 days a year. TBoL is working with the market to strengthen the current payment networks and bank rails via its next-generation payment-versus-payment (PvP), payment-versus-delivery (PvD) and atomic settlement innovation, evolving the legacy models to mitigate settlement risk and unlock liquidity by leveraging its patented innovations.
While globally payments bring almost US$2 trillion in revenue for incumbents, according to a 2021 report by LexisNexis, one of the single biggest and least discussed pain-points for financial institutions is failed payments – both in-country and cross-border. Failed payments are estimated to have cost the global economy over US$118 billion in 2020 alone. The payments failure rate for banks or fintechs in mature markets such as the UK, United States (US) and EU is a staggering 5%, on average – per company.
Global Transaction Banking – According to McKinsey, global transaction banking generates around $1 trillion of revenues every year for incumbents, and yet global transaction billing is complex and confusing. There are approximately 2,500 ways to price transaction banking, creating a gordian knot of costs almost impossible for customers (for example UK multinationals and SMEs) to decipher and track. While a rise in an individual fee may be slight, total fees get higher each year – a financial equivalent of death by a thousand cuts. Whenever the subject of bank fees arises between customers and banks, bankers justify bank fees by the complexity of the billing system, the constant increase in regulation, the cost of payment factories, and the investments they represent.
TBoL is finally democratising the sleepy backwater of domestic and international transaction banking through next-generation technologies and new business innovations providing sophisticated real-time products and services, including leading-edge global cash management, foreign exchange, treasury, liquidity, and other related services that are, for the first time free from intermediary risk, un-necessary costs, and complexity. In addition, TBoL will address the inherent structural failures of the business banking sector by deploying powerfully simple, yet premium corporate banking products and services to support businesses of all types, from SMEs to multi-national organisations and from start-up fintechs to household names across the UK.
- Global Agency Banking – Current 'Platform-as-a-Service' and Agency market offerings in general are not fit for purpose. They're friction layered, mostly single-service and carry serial intermediary risk and complexity. In fact, very few 'Platform-as-a-Service' providers are banks at all; thus, only as fast, or innovative as the legacy bank that 'powers' them. Lightyear Capital forecasts embedded finance will generate US$230 billion in revenue by 2025 and balloon into a $7 trillion industry within the next decade.
TBoL is rewriting the rulebook of the legacy 'platform-as-a-service' and Agency bank models of old and helping non-bank and other fintech brands take a slice of the US$7 trillion "Banking-as-a-Service" industry. TBoL effortlessly powers any company, brand, or non-bank firm to provide end-to-end bank products and services, in full regulatory compliance, without becoming a bank. TBOL’s clients will leverage its patented next-generation technologies and differentiated bank licence to offer packages of embedded financial services, from payments to cards, to multi-currency current, deposit, safeguarding or savings bank accounts to increasing client competitiveness by enhancing the customer experience with added value services, whilst generating additional revenue.
Ripe for disruption
According to Watson: “The world of global transaction and clearing banking needs disrupting. 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 US$2.5 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.
“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.”
Commenting on the launch, Schwartz added: “For the past four years, some of the brightest minds in banking, technology, economics, regulation, and business have come together as part of this team to transform and simplify clearing and transaction banking, the often unseen and neglected, yet vitally important, part of our financial superhighway.
“TBoL is uniquely positioned to provide innovative solutions that enhance a vital portion of the interconnected global financial system. We are purpose-built, culturally, and technologically. TBoL is innovating at our financial system’s core, so that our clients are best served with a safer, faster, more cost efficient and effective set of service offerings."
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