Credit Suisse is the latest traditional bank to launch a new digital brand. At the end of October, it will offer CSX, a digital service for new clients that lets them conduct all their banking business by smartphone.
CSX is intended for all private clients in Switzerland who want to complete their banking business swiftly and easily
Anke Bridge Haux, Credit Suisse
It includes a private account in Swiss francs, a debit Mastercard for online use that waives foreign transaction fees and an app with various self-service functions.
From mid November, a fully digital investment solution will be available. Mortgage clients will be able to obtain new financing directly in the app, together with extensions of existing mortgage tranches.
Pension planning will also be provided.
Anke Bridge Haux, head of digital banking Credit Suisse (Switzerland), explains: “CSX is intended for all private clients in Switzerland who want to complete their banking business swiftly and easily, and who value digital, professional financial advice.”
Across the banking industry, pandemic lockdowns have brought a new urgency to digital transformation as customers are forced to bank from home, cheque volumes collapse and no one wants to touch cash.
ClearBank offers particular insights into this.
Banks’ bank
When it was set up in 2017 as the UK’s first new clearing bank in 250 years, ClearBank was a technologically advanced wholesale provider of core banking functions – particularly payments and account handling – for other banks to white label to their own customers.
It was a bank for other banks, in particular new ones, the fintechs and neobanks then proliferating.
“New banks were promising better, faster digital services to customers in the UK, and we were the infrastructure enabler,” Charles McManus, chief executive of ClearBank, tells Euromoney. “Because whatever those new digital front ends promised, if the back-end processing remained slow and inefficient, nothing much would really change.”
He says: “Twenty-five years ago, the typical charge for a retail customer to move a large-value, same-day sterling payment through Chaps, for example to buy a house, was around £25. And today, at many banks, it is still £25.”
The UK’s big four incumbent clearing banks provided clearing services and payments processing for those fintech newcomers on creaking legacy systems, while competing with them for the same customers.
Whatever new digital front ends promised, if the back-end processing remained slow and inefficient, nothing much would really change
Charles McManus, ClearBank
Through Microsoft Azure, ClearBank offered secure and reliable private cloud-based connections to all the payments channels – Bacs, Chaps, cheques, faster payments, link, Mastercard, Visa – with faster and cheaper payments processing.
“With the latest IT infrastructure, you can give a very different answer than £25 to that customer wanting a same-day, high-value payment,” says McManus.
The new banks loved it.
OakNorth prides itself on state-of-the-art credit underwriting and monitoring. It has no competitive advantage in payments processing. Let ClearBank do all that.
Tide is great at SME customer services and management. Let ClearBank handle the core accounts through an open-banking service that customers access through the Tide app.
But ClearBank did not rush to onboard every new electronic money or credit institution.
“We do very heavy due diligence at the start because once we onboard a client, we onboard all of its clients,” says McManus. “And as soon as we start processing their payments, we handle their volume in real time. So, even if they are FCA-regulated, we look again at each new client’s own client onboarding, its anti-money laundering and fraud checks. And if we don’t think those are up to scratch, we will ask them to upgrade. Onboarding can therefore sometimes take months.”
New wave
By the time the pandemic was underway in the spring, ClearBank had just over 80 financial institutions on its platform, with just over 100 in the process of joining. Today, 108 clients are live and 136 are in the process of onboarding. What explains this jump?
“There is a new wave of older, established banks and building societies now coming onto our banking-as-a-service platform,” says McManus.
“I spent years as a CFO [at RBC and at RBS Ulster Bank], and when the banking industry hits difficulties, the traditional response is to chase revenue and cut costs. This time, revenue is under pressure with interest rates lower for longer and net interest margin is compressing.
“So, unless banks want to take a lot more risk – which looks like a recipe for disaster – they really do have to address their cost bases fundamentally.”
It costs a traditional bank £170 a year to provide a basic retail account. It costs digital banks £30 – and they provide a better experience.
McManus says: “Established banks can’t change their existing tech stacks fast enough to provide the services their front ends are crying out for. They are spending large amounts on Swift gpi, which is an updated messaging service, when what they really need is much greater, low-touch, digital-processing capacity for real time payments and account handling.”
He says: “We are getting a lot more incoming queries from mid-tier banks.”
Expansion plans
ClearBank is also expanding. It intends to offer the same service it has established in the UK in both the euro area and in dollars.
That will require it to establish connections to all the euro payments rails – such as Target 2, the Single Euro Payments Area (Sepa), Sepa Instant and the card rails – just as it did for sterling payments.
However, in the new era of service sharing in banking, it won’t follow that same path in the US, working instead through a local bank already connected to the automated clearing house (ACH).
ClearBank’s approach is indicative of the way in which the market is moving
Jon Lloyd, JPMorgan
On September 17, ClearBank announced it would be the first clearing bank to offer multi-currency bank accounts through an application programming interface (API).
McManus says: “Banks see a lot more of their small and medium-size businesses sourcing and selling across borders. Those businesses want real-time payments at low cost. They don’t want payments to take three days and go through a correspondent network with each bank charging a fee.”
From the fourth quarter of this year, ClearBank will offer more than 30 multi-currency bank accounts, letting customers move funds seamlessly between accounts with real-time foreign exchange pricing based on interbank rates, while removing the need to transfer funds to third-party accounts.
JPMorgan will be the cash-management provider bringing access to multiple currencies, pricing, and execution all via an API. Client funds will continue to be held by ClearBank.
Jon Lloyd, head of FIG sales Europe at JPMorgan, says: “APIs enable us to bring services to customers in a faster, more customized way, and ClearBank’s approach is indicative of the way in which the market is moving.”
ClearBank is on its way to becoming a cross-border clearing bank.
