DECEMBER 20, 2023
19 min read
Imagine an architect who is ambitious to build an extraordinary skyscraper. This building is planned to provide exceptional experiences for its inhabitants, the first of its kind. The architect sees a clear picture of how to build cozy apartments, the fascinating cafes, and the garden on the roof, which will provide a unique value to people.
But here is the thing.
Building such a skyscraper requires getting a full “skyscraper foundation license,” which is extremely time-consuming and expensive. With this fact, building these new experiences for people becomes impossible for this architect.
But imagine that there is a special solution for such architects — a unique platform that shares its foundation as well as its “foundation license” rights for a reasonable price. By integrating with this platform, skyscraper builders don’t need to think about all the requirements related to building its unique foundation and licensing it.
This way, the architect can focus on the experiences they provide, and the compliance matters are delegated to their foundation partner.
This is an allegory to what ClearBank offers its fintech clients.
ClearBank’s robust platform allows fintechs to move away from the costly and complex process of developing their own banking systems. Instead, they can use ClearBank’s advanced API-driven platform. This shift lets fintechs focus on innovation and customer service, leading to growth and a competitive edge.
At DashDevs, we have extensive experience integrating ClearBank into fintech solutions. Together with my team, I’ve witnessed firsthand how this integration is transforming fintech businesses.
Through this guide, I aim to share our knowledge and experiences, demonstrating how adopting ClearBank can change fintech operations, leading to more efficient, scalable, and market-responsive financial service delivery.
I will also share how we integrated ClearBank for one of our clients and what pitfalls encountered. All this will be drawn from my practical experience in the field.
What is ClearBank and How It Works
ClearBank is a digital-first bank, unique in its operation as it exists entirely online. It’s a fintech entity that leverages advanced technology to offer modern banking services to other businesses. ClearBank doesn’t work with individual consumers.
What Makes ClearBank Special
ClearBank was created and launched in 2017. It emerged as the first new clearing bank in the UK in over 250 years, introducing a new, technology-led approach to clearing and transaction banking, closely integrating with UK payment schemes.
Going back to 2016, the rationale for founding ClearBank becomes clear. At that time, the UK’s financial services space had consolidated significantly from 16 clearing banks to what is now known as the big four: Lloyds, HSBC, NatWest, and Barclays.
This consolidation impacted the effectiveness of UK payment schemes and led to a dominance of legacy technology in the sector.
The payment infrastructure offered to clients by these banks was strikingly similar, characterized by uniform costs, subpar service, and batch processing of payments rather than real-time processing.
During this period, the fintech revolution was in full swing. Frontend applications, those used by the end customer, were striving to innovate and simplify the customer experience. However, this innovation often hit a roadblock when these applications had to interface with the big four banks, leading to a deterioration in the customer experience.
Recognizing this gap, the founders of ClearBank decided to build a new kind of bank. Their vision was to create a bank founded on a modern technology stack, connected to all payment rails, and equipped to provide services through an API that the other banks could not. This approach was not just seen as a solution for the UK market but recognized as a response to a global payment networks’ issue.
Thus, fully regulated bank ClearBank was founded with the aim of transforming banking infrastructure and customer experience in the fintech ecosystem.
What Value ClearBank Brings to Fintech Businesses
ClearBank offers banking account services to fintechs and other companies, enabling them to function with bank-like capabilities even if they are not banks themselves.
Functionally, ClearBank provides access to all UK payment schemes via a singular, cloud-based platform, offering more efficient services compared to traditional banks.
Designed to comply with new banking sector competition regulations like PSD2 and Open Banking in the UK, ClearBank focuses on simplifying the process for consumers to switch banks and for new fintech companies to enter the market.
For example, Raisin, a fintech company specializing in savings and investment products, partnered with ClearBank to manage its UK retail savings accounts with embedded banking. Let’s explore what benefits ClearBank clients get on the Raisin example.
Specifics of the Raisin-ClearBank integration:
- Direct ClearBank API integration. ClearBank’s API is directly integrated into Raisin’s system. This allows Raisin’s customers to open and manage their UK savings accounts directly through Raisin’s platform, with all banking functions supported by ClearBank’s backend. This is a good example of embedded banking effectiveness for business. The integration is seamless, providing real-time clearing access to banking services like account opening, deposit management, and transaction processing.
- Market expansion for Raisin. By utilizing ClearBank’s banking infrastructure, Raisin has been able to expand its market presence in the UK. This partnership has enabled Raisin to access ClearBank’s established regulatory framework and banking license, facilitating an expedited and compliant market entry.
- Operational efficiency. The collaboration eliminates the need for Raisin to develop its own banking infrastructure or navigate complex banking regulations independently. This results in significant cost savings and operational efficiencies for Raisin, allowing them to focus on their core product offerings and customer experience.
- Compliance and security benefits. Leveraging ClearBank API platform means Raisin also benefits from ClearBank’s compliance with UK banking standards, including adherence to PSD2 and Open Banking regulations. This ensures that customer data is handled securely and that Raisin’s financial services meet the stringent requirements of the UK financial market.
- Scalability. ClearBank’s platform provides Raisin with a scalable solution that can handle increasing volumes of customers and transactions without the need for additional investment in banking infrastructure.
- Addressing a large market. The partnership is particularly significant as it targets the UK’s retail savings market, a sector with a substantial customer base and investment potential. Raisin, through ClearBank’s support, positions itself to capture a significant share of this market.
In essence, the Raisin-ClearBank integration exemplifies a successful application of ClearBank integration services, demonstrating how fintech companies can leverage such partnerships to expand their service offerings, enhance customer experience, and achieve operational efficiency.
As a result, ClearBank stands as a unique entity in the UK financial services space, positioned alongside traditional players like Barclays and HSBC, yet distinct in its digital-first, technology-led approach to banking.
ClearBank’s Key Features
Understanding the distinct needs of businesses, Clear Bank offers a range of tailored B2B solutions designed to support the financial operations and growth of companies of all sizes.
1. API for Fully Regulated Banking Infrastructure and Real-Time Clearing Access
ClearBank API revolutionizes the way its clients offer banking services. This API allows for the provision of real-time payments and various innovative banking products, enhancing customer experiences.
It stands out for its use of the latest cloud technology, ensuring scalability and resilience as client needs grow. The API’s unique connectivity simplifies integration, requiring only a single API for various ClearBank products.
Moreover, its high reliability is underscored by a dynamic failover system and zero-second downtime. The security aspect is robust, backed by Microsoft Azure Cloud and a zero-trust approach.
Importantly, ClearBank provides real-time notifications of account and transaction activities, keeping clients constantly informed. They also offer a simulation environment, allowing clients to experiment and test the API in a controlled setting before full-scale implementation.
This comprehensive approach makes the API a powerful tool for clients, offering ease of management, security, and adaptability in the rapidly evolving financial sector.
2. Fully Regulated Accounts
ClearBank’s accounts ensure that funds are held safely at the Bank of England, providing a high level of security and trust. ClearBank offers a variety of account types to cater to different needs:
- Operating accounts. These are designed to hold a business’s operational funds, allowing for efficient transactions management.
- Customer-segregated accounts. These accounts are set up to hold customers’ funds separately from a business’s operating accounts, ensuring compliance with Payment Services and electronic money regulations.
- Client money accounts. They allow businesses to hold money for or on behalf of their customers, separating customers’ investment funds under CASS 7 from the business’s operational funds.
- Multi currency business accounts. These accounts can hold multiple currencies in one account, providing customers with the ability to see their individual balances for each currency under a single IBAN.
ClearBank also offers a unique account structure system, including both virtual and real multi currency business accounts. Virtual accounts are publicly addressable, open in real-time, and scale with the customer base. They generate unique vIBANs (virtual IBAN accounts) for each customer, all linked to a real ClearBank account.
The real account structure, simplifying cash management, provides physical bank accounts where all GBP is held securely at the Bank of England.
Additionally, to enhance security and reduce payment errors, ClearBank has implemented Confirmation of Payee. This feature allows customers to verify the recipient of their payments, providing an extra layer of confidence and reducing the likelihood of payment queries.
This diverse range of accounts and features allows ClearBank to work closely with clients to determine which structures best fit their business ambitions, offering flexibility to opt for real accounts, virtual accounts, or a mix of both.
3. FSCS Protected Accounts
The UK Financial Services Compensation Scheme (FSCS) provides compensation to account holders if a bank, like ClearBank, fails to meet its financial obligations.
This coverage is limited to £85,000 per person per bank and encompasses all eligible deposits held at the same bank.
For clients using services like Electronic Money Institutions (EMIs) or Authorised Payment Institutions (APIs) through ClearBank, FSCS protection may apply in certain circumstances. This protection covers funds safeguarded by these firms on behalf of their clients.
It’s important for end users to review the terms and conditions of their financial service providers to ascertain if their funds held at ClearBank are eligible for FSCS protection. This protection may not always apply, especially where the service provider offers multiple services or in cases where funds are moved out of FSCS-protected multi currency business accounts during processing.
In the event of ClearBank’s insolvency, money safeguarded in accounts by EMIs and APIs will be covered by the FSCS, up to the established limits.
However, any funds exceeding the FSCS protected accounts limit will not be covered by the compensation scheme. In such cases, the excess funds would need to be recovered as a debt from ClearBank’s insolvent estate, classified under a special category of unsecured debt prioritized under certain conditions
4. Cloud-Based Banking Infrastructure
ClearBank’s cloud-based banking infrastructure, leveraging Microsoft Azure, offers a range of practical benefits for its clients, particularly financial institutions and fintech companies. This cloud-based approach is tailored to meet the fast-paced, diverse needs of modern financial services space.
The reliability of ClearBank’s cloud platform is a critical feature. Recognizing the importance of uninterrupted service in efficient transactions, ClearBank has developed its infrastructure to be highly reliable and scalable.
This scalability is essential for supporting the entire stack of services that fintechs offer, ensuring that there are no downtimes that could impact financial transactions or customer trust.
To ensure the resilience of its infrastructure, ClearBank regularly conducts resiliency test scenarios. These tests are designed to replicate outages and allow for experimentation with failures and retries. This practice is part of ClearBank’s commitment to constantly improving its application resiliency, a crucial aspect in the financial services space where even minor failures can have significant consequences.
6. Dedicated Relationship Management
When a client decides to integrate ClearBank, they are assigned a dedicated relationship manager. This individual takes the time to understand the client’s business thoroughly and becomes familiar with the client’s industry. This personalized approach ensures the relationship manager can provide tailored solutions and support based on the client’s unique needs and challenges.
ClearBank’s relationship managers not only understand the client’s business but also have deep knowledge of the client’s industry. This industry expertise allows them to offer insights and recommendations that are specific to the client’s sector. It means that clients receive guidance that is not only personalized but also highly relevant to their industry’s dynamics and trends.
ClearBank’s relationship managers are always on hand to offer solutions and support. This means that clients can reach out whenever they have questions or require assistance. This responsive support system ensures that clients receive timely help, enhancing their overall experience with ClearBank integration process.
BCB Group, a client of ClearBank, highlighted that ClearBank’s relationship management extends beyond routine or emergency support. The BCB Group’s experience illustrates this with a dedicated ClearBank relationship manager who was involved from the onboarding process through to the live operation of services.
BCB Group was onboarded and fully integrated into the ClearBank ecosystem in less than 2 months via ClearBank API, and their relationship manager supported BCB Group from onboarding through to go-live and beyond.
These features position ClearBank as a versatile and reliable banking partner for various financial institutions, offering innovative solutions and secure banking infrastructure.
Security and Trust: Is ClearBank API Integration safe?
ClearBank, as a financial institution operating in the United Kingdom, is required to comply with a range of security-related regulations to ensure the safety and integrity of its banking services.
Security-Related Regulations ClearBank Complies With
- Financial Conduct Authority (FCA) Regulations. The FCA sets standards for the conduct of financial services firms in the UK. This includes rules and guidelines around risk management, data security, customer protection, and anti-money laundering (AML) measures.
- Prudential Regulation Authority (PRA) Rules. As part of the Bank of England, the PRA oversees the financial stability of banks. This includes ensuring that ClearBank has robust operational and financial resilience, including in areas related to cybersecurity and data protection.
- Payment Services Directive 2 (PSD2). PSD2 emphasizes strong customer authentication and secure communication. It requires banks to implement security measures to reduce the risk of fraud in electronic payments.
- Anti-Money Laundering (AML) Laws. UK AML regulations, which are integral to the proper functioning of UK payment schemes, require financial institutions to have systems and controls in place to prevent, detect, and report money laundering activities. This includes customer due diligence, transaction monitoring, and reporting suspicious activities.
- Bank of England’s Standards. As a clearing bank, ClearBank is also a subject to the operational and security standards set by the Bank of England, particularly in its role in the UK payment systems.
ClearBank’s compliance with these regulations is crucial for its operation and credibility as a financial institution. It ensures that ClearBank adheres to the highest standards of security, data protection, and operational integrity, which are essential in maintaining trust and safety in the financial system.
Security Partners of ClearBank
ClearBank has implemented several measures to enhance its security and protect its platform, particularly in the areas of fraud detection and anti-money laundering (AML) monitoring. Here are some of ClearBank’s respected security partners that were declared publicly:
- Featurespace’s ARIC Platform
ClearBank has selected Featurespace’s ARIC platform to provide clients with an innovative approach to fraud and AML detection. The platform employs adaptive behavioral analytics and machine learning to learn individual behaviors and detect anomalies in real time. It offers advanced fraud detection and AML transaction monitoring capabilities, which are crucial for a financial institution operating in today’s digital environment.
- Collaboration with ThetaRay
ClearBank is working with transaction monitoring technology provider ThetaRay to protect its platform.
They aim to transform their AML monitoring operations into a fully cloud-native program using ThetaRay’s SONAR AML solution.
This system is based on AI intuition and is designed to effectively identify suspicious activities and create comprehensive profiles of customer identities. The SONAR solution can significantly reduce false positives and quickly discover both known and unknown money laundering threats.
These measures indicate ClearBank’s commitment to security and its proactive approach to safeguarding its platform against fraudulent activities and money laundering risks.
What Are the Alternatives to ClearBank?
To make the comparison practical, let’s revise the focus and ideal audience of ClearBank:
Focus: ClearBank specializes in B2B banking-as-a-service (BaaS). They offer clearing services, API-driven banking, and payment solutions primarily to financial institutions and fintech companies.
Ideal for: Businesses seeking robust BaaS with direct access to UK payment systems and those who need a highly scalable, cloud-based banking infrastructure. ClearBank excels in integrating with fintechs without a banking license, making it ideal for those who need a seamless backend banking partner.
When considering alternatives to ClearBank API integration, they can be categorized into two main groups: traditional banks that have expanded into BaaS and fintech or non-traditional entities that specialize in financial technology and BaaS.
Traditional Banks Offering BaaS Solutions
These are established banks with offline branches that have expanded their offerings to include BaaS, leveraging their banking infrastructure to provide services to other businesses.
Each bank has its own unique strengths and focus areas, making them suitable for different types of clients or banking needs compared to ClearBank:
Focus: A major global bank, Barclays offers a comprehensive range of services, including retail banking, wealth management, and corporate finance.
Ideal for: Businesses seeking a bank with a strong international presence and a wide array of financial products. Suitable for those who also value physical branch access and a long-standing reputation in the banking sector.
Focus: HSBC is one of the largest banking and financial services organizations globally, with a broad range of services from personal banking to major corporate financing.
Ideal for: Large businesses and corporations with international banking needs. HSBC’s global network makes it a strong choice for businesses requiring cross-border financial services and a vast array of banking products.
- Lloyds Banking Group
Focus: Offers a mix of traditional retail banking alongside modern commercial and business banking services.
Ideal for: SMEs and larger enterprises looking for a blend of traditional banking services with a strong presence in the UK and GBP payments network. Lloyds is well-suited for businesses that prefer a bank with a strong high street presence and a comprehensive range of banking products.
Focus: Part of the Royal Bank of Scotland Group, NatWest provides a wide range of banking and financial services, including a significant focus on business and commercial banking.
Ideal for: Businesses of all sizes seeking a bank with a significant UK presence, comprehensive business banking services, and a variety of financing options. NatWest is also known for its strong support services for SMEs.
In contrast to ClearBank integration services, which specializes in BaaS with a focus on fintech, these traditional banks offer a broader range of banking services with the added benefit of physical branch access and a more diverse product portfolio.
They are better suited for businesses that require a combination of in-person banking services, international financial operations, and a wide variety of traditional banking products alongside modern banking solutions.
Non-Traditional, Fintech Companies Specializing in BaaS
These companies are not traditional banks but specialize in offering banking and financial services through technology platforms.
Focus: Specializes in payments-as-a-service, offering flexible payment solutions and automation of payment flows.
Ideal for: Companies requiring sophisticated payment solutions, like automated payroll or B2B payments. It’s better for businesses focused primarily on payment processing rather than full-scale banking services.
Focus: A tech company with a banking license in Germany, providing APIs for various banking services and enabling other businesses to offer financial services.
Ideal for: European market-focused businesses needing a platform to launch their own financial products, or those seeking a banking partner with a strong presence in the EU.
Focus: Offers digital banking solutions, payment services, and card programs, targeting a wide range of clients from startups to enterprises.
Ideal for: Businesses looking for a more flexible and customizable banking solution, especially those needing card-based services alongside digital banking.
- Thought Machine
Focus: Provides cloud-native core banking technology, focusing on modernizing legacy banking systems.
Ideal for: Established financial institutions seeking to transition from traditional banking infrastructure to a more modern, cloud-based system.
In summary, ClearBank is better suited for businesses that require a robust, scalable, and integrated BaaS solution with direct access to UK payment schemes. On the other hand, each alternative offers its unique strengths.
Limitations of Clear Bank
ClearBank, as a specialized provider in the BaaS sector, has certain limitations that stem from its specific business model and service offerings.
- Limited product range. While ClearBank provides essential banking infrastructure and access to global payment networks, its product range is narrower compared to traditional banks that offer a wide array of personal and business banking products, including loans, credit cards, and wealth management services.
- Geographic focus. ClearBank’s services are primarily focused on the UK market. This may limit its appeal to businesses or fintech companies seeking a banking partner with a broader international presence or specific international banking capabilities.
- Dependence on technology. Being a technology-driven platform, ClearBank’s operations and service delivery are heavily reliant on its IT infrastructure. Any technological disruptions or cybersecurity threats could potentially impact its services more than a traditional bank with a more diverse service delivery model.
- Lack of physical presence. As a digital-only bank, ClearBank does not have physical branches. This could be a limitation for businesses that prefer in-person banking relationships or need services that are more effectively delivered through a physical network.
These limitations are reflective of ClearBank’s positioning as a fintech and BaaS provider, catering to a specific market segment rather than offering the full spectrum of banking services to a broad customer base.
How to Integrate ClearBank to a Fintech App: Our Experience
In 2022, we were approached by an ambitious UK-based fintech startup focused on providing innovative banking solutions to SMEs. They were rapidly growing but faced a critical challenge: their platform lacked the advanced banking infrastructure necessary to scale up and meet the increasing demands of the UK regulations.
Our task was clear yet daunting. We needed to integrate a robust, scalable BaaS solution that could handle high-volume transactions, offer faster payments, and provide seamless access to UK payment schemes and multi currency business accounts.
The solution had to be secure, agile, and perfectly aligned with the startup’s existing digital ecosystem.
After thorough research and deliberations, we chose ClearBank as our partner for this work. Their cloud-based infrastructure and API-first approach were exactly what we needed.
Here Is What the Integration process Looked Like:
- We meticulously customized ClearBank API to cater specifically to the transactional needs of the startup’s SME clients. This involved ensuring the APIs were seamlessly integrated into the startup’s mobile and web applications, offering a fluid user experience.
- A critical aspect of our role was to ensure compliance with Financial Conduct Authority (FCA) regulations. We also implemented state-of-the-art security protocols to protect transactional data, a task that was both challenging and rewarding.
- Performance testing was essential. We conducted extensive load testing to guarantee the system’s capability to handle a high volume of simultaneous transactions. It was crucial that the system remained fast and reliable under pressure.
- Lastly, we focused on optimizing the user experience. It was important that the new banking functionalities were intuitive and accessible for the startup’s SME clients.
The results of our integration were transformative. The startup was now equipped with enhanced capabilities like faster payments and multi currency business accounts. This not only elevated their service offering but also provided the scalability needed to accommodate their growth.
The reliability of the service solidified their reputation in the market.
Perhaps most gratifying for me was witnessing the competitive edge this project gave the startup in the SME banking sector. They began attracting a wider range of clients and partnerships, marking their presence as an innovative leader in the field.
Tips For Startups While Integrating With ClearBank
Based on my experience with the ClearBank integration project at DashDevs, here are crucial tips for startup businesses undertaking a similar journey:
- Dive deep into ClearBank’s specific API documentation. Pay close attention to endpoints that are most relevant to your services, such as faster payments, account management, and transaction reporting. Understand the limits, error handling, and best practices recommended by ClearBank.
- Work with ClearBank to understand their security protocols and ensure your systems are aligned with them. This could mean implementing specific encryption standards for data transmission or adopting certain authentication protocols for API access.
- After integrating ClearBank API, optimize your system’s performance. This includes fine-tuning the API call structure to reduce latency, caching frequently accessed data, and managing API call quotas efficiently.
By focusing on these simple tips, you will avoid the most common mistakes of ClearBank integration, leading to a better overall product and customer experience.
In summary, ClearBank API integration represents a transformative solution for businesses, offering real-time payment processing, enhanced security, and direct access to global payment networks. Its innovation lies in simplifying and accelerating financial operations, making it a game-changing tool for businesses of all sizes.
ClearBank has had a profound impact on the financial services space by challenging traditional practices and reducing friction and costs associated with banking services. It has ushered in a new era of efficiency and accessibility, catering to the evolving needs of businesses in the digital age.
Looking ahead, ClearBank’s future in digital banking appears promising. If you’re considering to integrate ClearBank into your business, DashDevs is ready to provide expert guidance and support. Contact us for more details.