Mark Fairless: CEO at ClearBank on hitting profitability and surpassing £100m of revenue

0:00Mark Fairless:Hello and welcome back. I'm joined by Mark Fairless, the CEO of Clearbank. Mark, thank you for joining me. Great to be here. Thank you for having me. It is my absolute pleasure. Clearbank is an amazing organisation, amazing UK fintech. But for those who haven't heard, can you talk a bit about the role that Clearbank plays in the ecosystem? Yeah, absolutely. I mean, we at Clearbank are building the financial infrastructure behind the next generation of digital finance. and that's across payments, clearing and embedded banking. So I guess what that means is that we help fintechs, banks and now corporates hold, move, store money in real time all through kind of modern cloud API native technology rather than the sort of legacy systems that have held them back in the past.

0:56So we were the first new clearing bank for 250 years, as I say, born in the cloud, API native, ISO 20022 standards. And what we have really been able to do is unlock the fintech boom that there has been in the UK. and that's our mission right is to is essentially to unlock the potential of our clients so that they can have the freedom to do what they want to do and and not have to to worry about the kind of the plumbing and the infrastructure behind behind what they do that's that's our job

1:35Mark Fairless:yeah yeah yeah i think that's a great way of putting you built the infrastructure to enable the fintech boom that we've seen in london you're partnering with amazing organizations i've read Revolut, Wealthify, Chip, you know, everybody knows these well-known, often consumer-facing fintechs have done amazingly well. I think what they don't always realise is that you're kind of have built the rails to enable these companies to provide the level of services that they do. That's right. I mean, I'm quite often in conversations, actually, where I'm talking to people in the market and they don't realise they've got a clear bank account.

2:04So the sort of beauty of embedded banking is, you know, other organisations, so you mentioned Wealthify, there's chip there's tide there's there's there's any number of them right um so so we're white labeling our bank accounts through those other uh organizations so that they don't have to be a bank they can offer banking products but fundamentally it's a it's a clear bank uh product at the end of it so it's quite a unique kind of a business model um that we have uh in the uk we're the only real scale uh player doing that and and it's been a huge success for us so we now have eight uh embedded banking partners, but behind them are sort of two and a half million end consumers, most of whom don't realise that it's ClearBank that they have an account with.

2:50It's a great product.

2:53Mark Fairless:And can I touch on, you know, you're very UK focused, but you've definitely been looking at European expansion. I think you, are you live? Have you already expanded into some European markets? Yeah, right. So we were founded in the UK and we sort of got going in 2017 in the UK. And there's a huge amount still for us to do in the UK. So, you know, lots planned. But you're right. So European expansion is the first step on our international expansion. So we got our license with the DMB in August of last year. And we've been ramping up ever since. We really got going in March of this year when we got live with all the different payment schemes.

3:35And we're having huge success there. So I guess, you know, going to the EU, what that's enabling us to do is not only win new business in the EU and support fintechs and the same innovation that we've had in the UK translate over into the EU. What it's also doing is it's allowing our UK customers to move with us into the EU. We're a very client-led organization. And the hypothesis of going to Europe was because we want to help our clients achieve what they want to achieve. And if they're in the EU, if they're in Europe, then that's where we should be as well in order to better support them. And it really puts us as a regional player for the first time.

4:17so able to take on much larger organizations and help them to innovate and access the real-time kind of payment infrastructure and the embedded banking infrastructure that we have on a much larger scale than we've been able to do in the past. So there's a huge opportunity in the EU for us. It's a market that's sort of four to five times the size of the UK. We're really excited about that. We've had some good early success. We've now got nearly 25 clients live. The The payment volumes are growing very well. We're passporting across the EU. We're about to open our first branch. So really excited about what we can do in Europe as well as in the UK.

4:58Mark Fairless:That's amazing. And what does that launch or expansion look like? Are you able to keep your team here or do you need offices or kind of like headquarters in Europe as well? So the beauty of what we do is we've built a fantastic tech platform. a fully scalable, resilient, as I talked about, cloud, API native. It's really the sort of crown jewels of what we do. And that can be taken to different geographies. So it's a single sort of tech stack, single product set that we've taken to the EU and that we'll take to others. And so a shared platform. And so as far as possible, there's a real benefit from that business model.

5:43However, we are a bank and we have a banking license in the UK and a banking license in the EU. We take the view that in order to be successful, we want to be close to our clients as well. So there is a footprint in the Netherlands. So we based it out of Amsterdam for our EU bank, as I say, also opening branches in France where we'll look to hire some people as well. So we will absolutely have a European footprint. I think that just makes sense, both in terms of understanding the market locally, understanding what the clients want locally, understanding the intricacies of different payments and schemes and regulatory environments.

6:26So we will stay a UK footprint heavy business, but we're absolutely on a expansion drive in the EU as well.

6:36Mark Fairless:And the organisations that you've started to partner with across Europe, have they been the similar type of organisations with the very similar use cases that you've done in London and the UK? Or are you seeing slightly different pools or customer profiles? Yeah, it's been really interesting, actually. So going back to sort of why we went to Europe, we went to Europe to better support our existing client base. And about half of the clients that we've got live in Europe at the moment were already UK clients. So a high proportion of them are moving with us. So they already had banking partners in Europe, but our partnership is in a good place where they are willing to then move to us to kind of better execute on their products, their ambition, their own purpose.

7:28And then about half of them are net new clients, but they're all kind of in the fintech and banking space. So similar, all want to kind of change financial services in their own way and with different propositions for their clients. And so we do see a big sort of similarity in the client base in the EU. At the moment in the EU, we're focused on clearing and payments rather than the sort of embedded banking that will come later. but already we're getting a lot of inbound interest in European businesses of a similar nature to the UK businesses that we already partner on embedded banking. So the demand is there and it's great.

8:13I mean, it is a different market. We didn't go into Europe with the assumption that it's a copy and paste of the UK. I think that would have been a mistake. There's lots of nuances within that and of course Europe is a single market but of course it's sort of not and there's a lot of regional variations around that so that's why I sort of talk about we're going into branches France makes sense first for a branch there's a lot of kind of regional variation between the different EU states but no so I guess in summary I guess it's similar it's currently a similar client base who have seen the success that we've had in the UK and and are coming with us to join that in Europe.

8:53Mark Fairless:No, amazing. And you talk about the complexities of scaling in Europe and the fact that it isn't really a single market, especially when it comes to financial services and the complexities there. Did you ever think, okay, maybe the US would be a better market to go after first? And we're seeing a lot of the UK fintechs, whether it's Starling, Monzo, Revolut, are all trying to tap into the US market now. Was that ever an option? Or did Europe always just make the most sense? Yeah, and so it's definitely something we looked at because I think the first three would always be I think UK, EU, US then the question is in what order so exactly the right question.

9:32I think what we did, the view we took was there's more client centricity by going to Europe first so that's where our clients were more present, that's where the demand was coming from our clients and so I say we're a client-led business. But having now done that and scaling very successfully so far in Europe, the demand is now for the US. So we are looking at how might we do that. And you're right, it's increasingly a market that the UK fintechs and neobanks and unicorns are all kind of heading towards. They've all got a similar strategy, I think, for how they're going to get there, which is actually a great success, you know, a success that the UK should be proud of, that we've managed to build and scale these businesses to a size where not only are they successful in the UK, but turning their attention to the US.

10:27So the EU made sense on the basis of, you know, our clients and what they wanted, but they also want the US. And so that's what we're looking at next.

10:36Mark Fairless:Really interesting. And, you know, I think that makes sense from a market expansion angle. When you look at product expansion or new innovative products how is how are you and how is clear bank thinking about the excitement that we're seeing over something like stable coins at the moment is that a space that you're getting yourself interested in are you able to facilitate kind of accounts or payments in that space are you looking at doing something in that sort of like new world yeah so so stable coins is a is a really exciting development um uh for for for a variety of reasons and if you look at what the success and the way it's taken off in the US with trillions in transactions now or the success of Circle you can see that stable coins are making rapid impact on payments of financial services and our view is that that is likely to continue and we welcome that I think what it enables is a removal of friction and complexity in the payment flow enables real-time cross-border payments, which is not an easy thing to achieve.

11:47So stablecoins are really interesting and innovative solution to a kind of problem of complexity. I think we want to be at the edge of innovation on payments and clearing. We are a clearing bank the first for 250 years. So if we want to be in that space, we have to adapt with where that's going. And so we are kind of very closely looking at what is it we can do there. We have signed some partnerships that we'll announce in due course about our plans in that space. I think looking at the difference between the UK and the EU, what we can see is that the EU are a bit further ahead at the moment in terms of the regulatory framework with the Mika regulations.

12:34I know the UK are looking to be kind of fast followers and to accelerate the kind of regulatory framework there. So we will welcome that when it comes for the UK. But in the meantime, I think in the EU, there's some interesting things we can do. We absolutely want to be looking in that space and embracing it and moving with the times and continuing to kind of embrace the innovation in the sector.

13:00Mark Fairless:Yeah, absolutely. There's so many exciting things going. It seems like it's having such a big moment. Yeah, but it sounds like there's definitely things that you're working on and we'll probably be able to talk about more in due time. I also wanted to touch on your background as a CFO. You joined ClearBank as a CFO. You then kind of got promoted and brought in as CEO. What's that experience and that transition being like from CFO to CEO and how has your role changed? Yeah, it's a great question. One I've had a few times and I think people sometimes struggle with my answer, which is it hasn't been that big, as a bigger transition as maybe people may think.

13:38And you go, well, why would that be the case? But I guess as a CFO, you have a very good understanding of the business, right? So you know how the business works. You know what the drivers of it are. You know the main players that you're dealing with. You're outward facing. And you are dealing with the strategy and the direction of the organization. So you know the organization inside out. And that's a pretty good basis for sort of moving. And it was a fantastic honor to be asked to be the CEO of Clearbank. I think it's a privilege and I think ClearBank is a business that over the next few years is going to continue to do great things and innovate in the market.

14:26I think the key differences, I guess, come into that part of the question. And it's all upside from my perspective. spending time with clients, dealing with a broader range of colleagues and issues. The breadth of what you have to deal with as a CEO is substantially more than the CFO. And also as a CFO, you're kind of a strategic advisor as the CEO. You've got to make the decisions. And so that's a big difference too. But fundamentally, the things that come with it, the kind of meeting clients, understanding what they need, mapping out a path forward, I love all of that. So it's been a really, really welcome transition for me, very much enjoying it.

15:16And I can't wait to see what we can deliver over the next few years at ClickBank.

15:22Mark Fairless:Amazing. And what do you think, or how has being the CFO shaped your... I mean, in some ways, it's almost easy, right? Because you say you've got an amazing visibility of the business, you know, the business inside out. But how has it shaped the way that you, you know, or has it changed the way that you approach those customer relationships or the product side of things, having that CFO background? I'm sure it has. It's sort of part of my training, part of my experience, part of who I am. I guess if I think about what skills sort of a CFO brings, the experience that a CFO brings and how that translates across the sort of the things that are going on.

16:01I suppose when I was a CFO, I was focused on how do we build this business for scale, right? It's grown rapidly, grown very quickly. what we need to do is make sure that we're investing in the right places to so that we can scale this business in the right way at the right pace and all of those things and that essentially is sort of building a machine within the business to sort of take it forward and I think you know moving over to to CEO that that continues to be a focus but in a very different way so how do we make sure as you know we're now an organization of of 800 plus people and so the way we think about moving forward is different to when we had 200, 300 people.

16:45So how do we set ourselves up for the next stage of our evolution, of our growth, and really kind of untap the sort of talent of everyone in the organization and mature as an organization, without losing the essence of who we are. We're really proud of the culture we've got and the relationships and the collaboration that we have we need to keep that but we need to sort of build ourselves a scalable uh environment that we can continue to grow so i think that is one kind of i guess read across from being the cfo but i've also intentionally tried to vacate the space of the cfo we now have another cfo i'm not going to step on on his toes so so that's for him now and i've i've kept him uh given him a wide berth so that i don't get involved in that and thrown myself much more into the product side of things, the client side of things, where, you know, actually, and it's great because it's really, it's really interesting part of the business.

17:41And a part of the business where I have, I think, strong views on what we need to do. So, yeah, so I would say really, really enjoying it.

17:49Mark Fairless:Yeah, no, it's good to hear. And, you know, there's been a lot of talk about the state of both the UK more generally, but also the tech market as a whole, you know, putting on your CFO hat, what do you make of the market at the moment? And is that, you know, I know that ClearBank raised, I think, a bunch of money earlier this year, last year from Apex Digital. Are you thinking about the state of the market, whether that's capital markets and IPOing, whether that's the opportunity to run secondaries, whether that's the ability to raise more money? Are you looking at the market dynamics and is that shaping the vision that you have for ClearBank?

18:22Yeah, you're right. So we're fortunate to have raised some money in 2022 with Apex Digital. and that you know with combined with I guess profitability in the UK bank we're very well funded for the plans that we have but of course we're always looking at the the state of the market and what's happening and I think you know if you look broad more broadly what you can see you know and I'm sure everyone sort of is familiar that the state of the IPO market in the UK I think isn't where we want it to be. The liquidity in the market isn't quite there. The valuations aren't there. And you see that in the number of businesses that are choosing to list in the US, where the perception is it's an easier place to list.

19:08There's this greater risk appetite for growth stocks, growth businesses. And so you get a higher valuation and access to deeper pools of capital. Now, I think there's a lot of focus. I think the government are focused on what they can do to help the UK market. I think there's some green shoots in terms of stuff that's happening. It's great to see Shawbrooke announce that they were looking at an IPO in the UK. I think Revolut have announced they're looking at a dual listing. And there's the Pisces market where there's the ability to exchange private shares. So there's things happening that are moving in the right direction.

19:47I think there's a lot of will to make the UK more competitive on an IPO side. And I think that will happen. I think we will get there. I think there's a huge amount of UK success stories waiting for that to happen. And I think once it starts to happen, then it'll happen really quickly and we'll see that grow. But as for ourselves,

20:09I've essentially, you know, taking up the CEO role, mapped out our strategy for the next three to five years. that doesn't require any primary capital raises or anything of that nature. So for now, we're focused on executing on that strategy.

20:25Mark Fairless:Amazing. Can I ask, you know, when you look at something like Pisces, is that something that's like interesting or exciting for ClearBank? You know, not necessarily whether you take part in it, but is that something that you look at and think, OK, this is a government that is willing to try innovative things, to try and reopen our capital markets up in some way or another? I think it's a as a sign of intent and a sense of direction. I think it's really positive. I think you take that, but you also take things like the leads reforms that were announced at the Mansion House speech earlier this year.

20:54You can see that the government are serious about tackling the issue. I think, you know, there's definitely been a recognition that we've had a huge volume of success at the startup level. And now we've got a series of businesses going through kind of a scale up journey. And they're not quite getting the same level of support that they did as a startup. So how do we help them grow? and I put Clearbank right in that camp. And so the sort of lease reforms that were announced by the Chancellor of this year with changes around MREL and capital requirements, changes around kind of the timeframes for regulatory approvals, for SMCR, the creation of scale-up unit, there's lots of things that are happening that are moving us in the right direction.

21:48And so I'd say that that with Pisces and other things are a real signal of intent that the government is looking to support the growth, continued growth of the sector that's been such a success.

22:02Mark Fairless:Yeah, and I couldn't agree more. It's a great intent and it does look like the market is changing at the moment with Shawbrookes and other companies and what they call the beauty group IPO'd and, yeah, Revolutial Listing. It feels like we really reached the bottom and it feels like now we're starting to see things turn up again. But look, Mark, I'm conscious we're out of time, but thank you so much for joining me. It's been an absolute pleasure chatting. I love what you've built. I love what you're kind of providing through your products for the FinTech ecosystem. And yeah, let's stay in touch.

22:37Fantastic. Pleasure to be here. Thank you.

22:40Mark Fairless:Amazing. Thanks, Mark.

22:48Thank you.