The Bank of London today launches as the 6th principal clearing bank of the United Kingdom (UK), with a mission to lift communities and power the borderless economic infrastructure of the future.
Led by an executive team of industry pioneers and a board of renowned global leaders, the bank enters the market with a $1.1 billion valuation, making it the first pre-revenue bank in history to attain 'unicorn' status upon debut.
The Bank of London received its first bank licence as the 6th principal clearing bank of the UK – becoming 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 $120 million to-date, with $90m in this round, immediately ranking 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. The majority of these hires will be initially made in the UK.
Anthony Watson, Founder & Group Chief Executive of The Bank of London, said: "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 continued: "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, Group Chairperson of The Bank of London, said: "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."
He continued: "Fundamentally, banking is basically an immensely complex data problem. The Bank of London is the solution. And our unique solution is simplicity."
The Bank of London enters the marketplace with three distinct market offerings:
1. '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.
The Bank of London addresses the principal risk factors across payments, clearing, liquidity and settlement (Herstatt1) – 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. The Bank of London is working with the market to strengthen the current payment networks and bank rails via its next-generation payment-versus-payment (PvP)2, payment-versus-delivery (PvD)3 and atomic settlement4 innovation, evolving the legacy models to mitigate settlement risk and unlock liquidity by leveraging its patented innovations.
While globally payments bring almost $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 $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.
2. '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.
The Bank of London 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, The Bank of London 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.
3. '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 $230 billion in revenue by 2025 and balloon into a $7 trillion industry within the next decade.
The Bank of London 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 $7 trillion "Banking-as-a-Service" industry. The Bank of London 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. The Bank of London'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.
Commenting on the bank's launch, Watson said: "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 $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."
He added: "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 bank's launch, Schwartz said: "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."
He added: "The Bank of London 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. The Bank of London 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."
