Charles McManus, CEO of ClearBank, speaks at the Innovate Finance Global Summit in April 2023.
Chris Ratcliffe | Bloomberg | Getty Images
ClearBank, a British fintech that powers payments for the likes of Coinbase, posted its first full year of profits after rising interest rates helped drive a 91% jump in revenue.
The company turned a pre-tax profit of 18.4 million pounds ($23.3 million) in the year ending December 31, 2023, according to financial statements released on Thursday. This is higher than a loss of £7.1 million in 2022.
The bank reached profitability for the first time on a monthly basis in November 2022. This is the first time it has reported profitability on an annual basis.
ClearBank's first profit comes on the back of nearly doubling its total income. ClearBank saw overall revenues rise 91% year-on-year in 2023 to £111.3m.
The company has benefited greatly from high interest rates, which have led to a surge in deposits as consumers and businesses look to get more bang for their buck by storing cash in interest-bearing accounts.
Tide, one of ClearBank's main UK clients, is offering an interest rate of 4.33% to its corporate clients, with advertising across buses and London Underground trains to promote the strong offer.
ClearBank CEO Charles McManus told CNBC that the company was a clear beneficiary of rising interest rates — but he was quick to stress that ClearBank doesn't rely on interest income and that transaction revenue is growing healthily as well.
McManus said there was “no single driver” of ClearBank's positive performance in 2023, adding that ClearBank benefited from a number of things, such as its clearing business for licensed electronic money companies and growth in the use of bank-to-bank payment services amid rising credit card fees.
“We've built the bank and the business model over a number of years,” McManus told CNBC in an interview. “You see its flavors across our business lines.”
High deposits
However, it's hard to avoid the fact that higher deposits have been the main driver of ClearBank's performance for the year. The company says net interest income rose by 142% to £81.9 million, as deposits reached £6.1 billion.
One of the main drivers of ClearBank's deposit growth last year was the collapse of Silicon Valley Bank, a major bank used by fintech startups and venture capitalists. Silicon Valley Bank's gated UK division, HSBC Bank UK, has been bought by British banking giant HSBC for £1 and renamed HSBC Innovation Banking.
This sent deposits at ClearBank soaring, as SVB customers fled in search of alternatives.
“The market has been under pressure in terms of credit, banks are going out of business, whether that's in Europe or the US or the concerns in the UK, and because of the business model in terms of cash, it's a safe haven.” McManus said.
“Rather than just being a safe haven, cash is collateral for pain schemes,” McManus added. “The more payments we make, the more cash we actually need to hold as collateral for our customers for faster payments,” the UK scheme for sending electronic payments in sterling in an instant.
“Our clients actually left with us more money rather than taking fractional banking risks in relation to Barclays during those periods of stress,” McManus noted.
Founded in 2015, ClearBank is a clearing bank and regulated payments institution in the United Kingdom. It provides banking services to the likes of Coinbase, as well as other fintech companies such as savings apps Chip and Raisin, and business banking startup Tide.
All funds stored in ClearBank accounts are held at the Bank of England, meaning customers who keep their money with companies powered by ClearBank's technology can benefit from higher returns on their money.
ClearBank recorded total fee income of £31.4m in the full year, with the recurring platform a key driver. The number of consolidated banking end-customers, or ClearBank client customers, grew 93% year over year to 1.2 million.
In no hurry to go public
ClearBank is in no rush to do an IPO, McManus said, adding that it already has a significant amount of cash on its balance sheet. In 2022, ClearBank raised £175 million in a funding round led by private equity firm Apax Digital.
The ClearBank president said it was important for the company to complete expansion in the US market before deciding on a public listing. He added that the decline in shares of Cab Payments, a UK-listed payments company, made it unattractive for a company like his to decide on a listing in the near term.
ClearBank is currently seeking an EU banking license via the Dutch Central Bank. The company had hoped to complete its license application by 2023, but now says it expects to obtain its full EU banking license later this year.
Brexit played a role in the company's fight for an EU banking license, with ClearBank being looked at “very closely in relation to all of that,” McManus said.
The UK's decision to withdraw from the European Union has made it more difficult for British fintech companies seeking to expand their operations in the bloc, as Britain is no longer in the EU's single market, and financial firms are no longer able to offer 'passporting' rights that allow… For companies operating a single UK license in all EU member states.
