Fintech in the UK is BACK

"UK API-first digital bank Clearbank posts full-year profit, and IMO shows the future model for embedded banking 👇

Clearbank is a digital-only bank in the UK focused on payments and deposits. It does not offer direct consumer or business accounts. Customers like Coinbase have helped drive it to a full-year profit of £18.4m ($23.3m) after a 91$140m). The company says it has benefitted from rising interest rates and customers diversifying deposits after the collapse of SVB's UK arm.

🧠 BaaS in the UK is being driven by banks with APIs. Clearbank can help its non-bank clients (like Chip and Raisin, savings-focussed apps), pay high APR yields to its customers, and give FSCS protection (think FDIC US readers).

🧠 Clearbank has been around for a while but seems to have got its act together. After starting strong, Clearbank lost its way in the late 2010s emulating many of the big banks and going after a similar client base, by focussing on embedded banking it's found a niche and started to win.

🧠 Rates will come down. The Bank of England is signaling rates may come down this year (a bit like the Fed), so those sweet deposit yields won't be quite as sweet. However, today, Clearbank does pass most of that back to its clients. This business runs lean and is a model for the future of BaaS.

🧠 Competition is coming, but Clearbank has a head start. Griffin just got its Series A and full banking license and competed directly with Clearbank. Natwest Boxed is attempting to do more embedded banking. My read is the big banks will play for big retail, and new entrants like Griffin will play for smaller companies. Clearbank's sweet spot is the middle ground of companies like Tide, which banks around 10% of all SMBs in the UK, or Alica, the fastest-growing company in the UK.

Simon"

Author

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