ClearBank explores M&A options for US entry – CEO

Interview 8 November

ClearBank explores M&A options for US entry – CEO

ClearBank is considering strategic partnerships, joint ventures, and M&A among the options for its planned US entry, CEO Charles McManus told this news service. 

The London-based clearing house wants to venture into the US by merging, acquiring, or forming a JV or strategic partnership with a US bank that is connected to the local payment rails, McManus said on the sidelines of the Web Summit, held last week in Lisbon. 

The current “tough” market conditions could present opportunities for consolidation in the banking sector by “shaking out the weakest”, McManus said. ClearBank has recently held a number of “interesting conversations” with potential M&A targets, the executive said. 

A potential deal structure could involve ClearBank segregating the core payments arm from a target which also provides retail or commercial banking services, McManus said. ClearBank will continue to focus on facilitating payments for the time being, he said. 

The company could look to raise capital to fund its M&A strategy, the executive said, noting that it will make sense to bring in new investors eventually for a potential future exit.  However, it has no plans to raise further funds next year, he said.  

In March, ClearBank raised GBP 175m by selling a minority stake to Apax Digital, the growth equity arm of Apax, to accelerate its global expansion. 

ClearBank wants to make a decision on its US entry strategy within the next 3-6 months, said McManus. It is receptive to pitches from financial advisors to bolster its M&A strategy, he added, noting that it does not have exclusive relationships with any banks or advisory firms. 

The company is not currently considering entering the US without a partner of some kind because it would take at least three years to acquire a local banking license. “We can’t wait that long,” the CEO said. 

ClearBank, which offers an embedded banking platform as well as cloud-based payments services, plans to enter the US after it has established itself in the UK and Europe, McManus said.

The company held GBP 3bn in deposits at the Bank of England as of March. Meanwhile, it has applied for a full banking licence in the Netherlands and hopes to begin operating in Europe in 3Q23, he said.  

Management is concurrently assessing whether the conditions are ripe for ClearBank to expand into other countries, including Australia, New Zealand, Canada, and the UAE, said McManus. 

ClearBank’s fully-regulated cloud-based software provides financial institutions with the infrastructure needed to process and clear transactions. Around 250 financial institutions are live on the platform, including credit unions, building societies and fintechs, the CEO said. 

The company does not disclose its financial information but expects to double its annual revenues this year despite the market headwinds, McManus said. It charges its customers a monthly fee for holding a bank account, and receives a commission on each transaction processed, McManus said. 

ClearBank has been backed by CFFI UK Ventures (Barbados) Ltd and PPF Financial Holdings BV since it was launched in 2015, the CEO said. 

Herbert Smith Freehills advised ClearBank on the Apax Digital transaction.  

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