EXCLUSIVE: “A Clear need for change” – Charlene Lemard-Maxam, ClearBank in ‘The Fintech Magazine’

Charlene Lemard-Maxam from ClearBank tells us why its crossing borders and how digital currency will ultimately be part of the payments mix

According to a report this summer from payments provider Neo, 78 per cent of SMEs rely on incumbent banks for their cross-border transactions, but they’re not necessarily happy with the service they’re getting.

It said 55 per cent of SMEs identified ‘unfair pricing’ as their biggest pain point, while 45 per cent were dissatisfied with how long a payment took to arrive: 72 per cent reported funds taking two to five days to appear on suppliers’ bank statements. PayUK found a similar story when it asked SMEs what their experience of banking and payments had been in 2022.

It said only 15 per cent of SMEs did not experience any problems arranging cross-border payments, although it claimed ‘65 per cent of UK SMEs are using non-banking payment solutions to get around these pain points, including payment service providers and electronic money institutions’.

ClearBank’s senior client director Charlene Lemard-Maxam agrees that serious problems still exist in the cross-border space.

“There are certain barriers to entry,” she says. “It’s still very difficult for some small and medium-sized businesses to make payments effectively, given the challenges around just opening a bank account and having bank accounts in different locations.

“In addition, there are problems such as the speed of transactions; there are issues with SWIFT transactions, for example, that still take days to settle in some jurisdictions. And fragmentation of data formats means it’s just really difficult for SMEs to get a full understanding of where their payment is, if it has reached the beneficiary, because sometimes that data is truncated and lost.

“I think there will be interoperability between legacy systems and new tech, such as digital currencies and stablecoins”

“That said, we are seeing a lot of movement towards the New Payment Architecture in the UK, and more adoption of ISO 20022, which, in itself, will help the UK payments infrastructure and ensure that payments are faster and swifter here. The same thing is happening in the US, with the instant payment service FedNow, which is huge for retailers – where it used to take ages for them to get refunds, now that’s potentially instant.

“So there’s more of a focus on local payments, and, globally, adoption of instant payments locally, which then should, hopefully, feed through to the cross-border space.”

TRANSPARENTLY DIFFRENT

When ClearBank launched in 2017, promising to provide a fully regulated banking infrastructure and real-time clearing access for fintechs, challenger banks and credit unions, it broke the Big Four banks’ monopoly as gatekeepers to the UK’s payments infrastructure.

Backed by PPF Group from the start, in 2022 it raised £175million from new investor Apax Partners to fund expansion into Europe and the US. A banking licence from the Dutch central bank is imminent, allowing it to passport services to other key economies in Europe. Here, it will meet competition from payment facilitators making similar claims to be able to cure the cross-border headache that millions of SMEs can’t shift – Banking Circle, Railsr and Solaris Bank among them.

But ClearBank’s trump card is its established status in the UK, where it holds deposits on a 1:1 basis at the Bank of England, its core revenue coming from fee-based transaction services and embedded banking, which is an increasingly important part of the mix. SME financial platform Tide, for example, now offers its 550,000 clients, representing 10 per cent of the UK’s small business market, a current account via ClearBank.

This combination of clearing and licensed banking for third parties put ClearBank on track for its first full year profit in 2023/24. Its half-year results, published in September, showed it had more than doubled its year-on-year revenue allowing it to realise a pre-tax profit of £5.9million, with deposits growing by 80 per cent to £5.4billion.

But the business model doesn’t stack up in quite the same way outside of the UK; to qualify for a full banking licence in the EU and the US, an institution must offer lending services. CEO Charles McManus has already said the bank will do ‘credit intermediation in connection with payments’, but will not offer loans or mortgages.

“As we expand into Europe, we hope to become a strong international player within the transaction banking space,” says Lemard-Maxam. “That’s our primary focus, partnering with other financial institutions and non-banks to provide top-tier transaction services to them and their underlying clients.”

For now, ClearBank offers a current account, a virtual account, and an interest bearing account. But it’s not shy of engaging with the digital asset community – it already handles the receipt and disbursement of funds for several regulated exchanges.

“We are looking at digital assets,” confirms Lemard-Maxam. “There is a lot of opportunity to innovate in this space and ClearBank wants to make sure we are at the forefront of that innovation. So, we’re working with our partners to establish use cases where we think that not just ourselves and the underlying SME, but the end user will benefit from such technology.

“A lot of work still needs to be done, but I’m really excited by the direction of travel,” she adds. “In the future, I think there will be interoperability between legacy systems and new tech, such as digital currencies and stablecoins. There will be an amalgamation of the old and the new. What will underpin that is finding the right partners to come up with a solution that offers value to different users across the payment channel.”

This article was published in The Fintech Magazine Issue 30, Page 44-45