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The 8th in our special series of episodes that we are recording in partnership with the European PR Agency Tyto, and their own Without Borders podcast.
Charles began by explaining that he was fortunate to meet his Co-Founder, Nick Ogden, who founded World Pay and Cash Flows. He explained that back in 2015 Nick was thinking about the arrival of the new retail banks, like Atom and Metro, and the ones that everyone knows today such as Starling and Monzo. But he was asking himself the question of where was the new infrastructure clearing bank? If you are one of the regulated financial institutions (FI) in the UK today, a credit union, a building society or, bank or an e-money license holder, you need to clear your payments through the UK, payments platform each day. Traditionally you would have gone to a clearing bank to do that. There used to be 16 clearing banks in the UK and through market consolidation, today they are only the ‘big four’. Charles said that Nick’s idea was that if you have the latest tech in terms of Microsoft Azure and cloud and you actually provide the same service and real time payments, then you could bring a whole different experience to those regulated FI’s and compete against the ‘big four’. He added that being the first new clearing bank in 250 years, shows how long it’s taken for someone to take the idea and turn it into reality. He believes that they are very privileged to actually hold that position and they now offer clearing services to all those FIs. ClearBank are a B2B proposition, they don’t actually face consumers in terms of B2C, but all of their services make a difference to consumers ultimately being able to make real time, faster payments.
Charles added that when you are talking about infrastructure or the pipework that payments actually go through, that’s the boring, back end. Everyone loves the latest app in terms of something that can give you an amazing experience, but no one thinks about when you click and make a payment or faster payments or you set up a direct debit, what actually happens at the back end? But in the new fintech world, it’s actually the empowerment of all of those brilliant things. So, new people doing new things without the back end actually being real time and all the ‘sexy’ tech would ruin the whole experience. The consumer rules and you want to get to the front-end retail in terms of making a difference, the back end is less exciting and interesting even though it’s fundamentally important in relation to the whole proposition.
Charles believes that there has been a focus on retail which has ruled SME, the infrastructure side is has been neglected but actually it is the most important part. There aren’t a lot of people who are actually doing it and ClearBank wanted to be a first mover to that change and help and enable fintechs to then disrupt financial services at the front end.
As a vision, Charles said it’s been really exciting in terms of the journey they have been on. Even through COVID-19, enabling their customers to really make a big difference in servicing their customers through, pre COVID, but now very much during COVID, where there has been such a big shift from use of cash and cheques switching to contactless and digital. That has played into the need for real time, low human touch, faster payments. That’s exactly the service that ClearBank provide.
Charles explained that whilst ClearBank are open and transparent about their financial position with their contacts and clients, they are ultimately a private company. He said that it is an aspiration of theirs to become a unicorn, to grow a very sustainable, real business, rather than a flash in the pan or a fad. They have been actually growing the business very sustainably, successfully and managing their growth, and they are on their way in terms of going up the ‘J’ curve in relation to valuation. They have two billionaire shareholders that have been their main providers in relation to funds.
ClearBank have got a very clear path to profitability and as they have done that, their internal valuation, has continued to increase and they are discussing with their investors, essentially widening that investor base. In relation to the total funding, CET1 capital is in excess of about £150m of the main two billionaires, plus, their minority shareholders, including management and the executives that are actually funded. So, that is the level they are at with ambition to continue to do more. They have got wider expansion plans for Europe, US dollars and others that will require additional capital funding. He added that they are very fortunate having two billionaire shareholders that very much have backed the business to date and presume they will continue to do so in the future.
Charles explained that it’s a complex environment for those that are involved in financial services and passporting rights, where in financial services, essentially within Europe, everyone can passport with the right regulatory approvals to operate in all the European countries. Of course, post Brexit that all changes and the Bank of England, PRA have been doing a lot in allowing overseas banks to actually operate in the UK. Looking at how they operate in the EU is something that has been on every UK bank’s agenda for a number of years now. There are still a number of uncertainties as to whether they can service some of their European customers that have operations in the UK, whether they can continue to service them post 31st December.
ClearBank is helping its clients in actually ensuring that they have got all of their passporting rights in the UK. For those that don’t, going back to their respective countries within the EU, they are actually looking at how they serviced them in relation to their presence within Europe. Charles added that it’s no secret that they have been looking at setting up a European operation to do exactly that, almost irrespective of Brexit.
They have recently had to fill the board and strategic discussions with their investors in terms of those plans and they still very much have plans in place for setting up a European entity, which will be an equivalent to ClearBank, they will have a European entity and a UK entity, and will be able to service both UK and European clients seamlessly under the right jurisdictions. He added that there is no question that it is a challenge, the preparations of banks overall have done a really good job in getting prepared. But undoubtedly, like year 2000, and another major milestones of change, there will be issues of people not being able to trade or continue their business without the regulatory approvals. Charles thinks that most people are in good shape and that it is the opportunities and the equivalents on passporting and how the ECB, the Bank of England and PRIFCA with the others actually match up to the UK not being treated as a third world country in terms of Europe on an equivalent basis, being able to carry on and do financial services or business seamlessly across the borders. He said that’s where they all watch Boris [Johnson] and the government, there’s going to be a hard or soft landing in terms of what’s coming up. On the wider economic basis that’s the aspect they concern more in terms of where UK, PRC will be as compared to where ClearBank and their clearing business will be, which should be in good shape. Charles said that they want to make sure they have got maximum opportunities of their SME’s and although the business community in relation to the EU market going forward is unknown. They need to get sorted out because as we all know, it’s hard enough during COVID-19, uncertainty does not help economic growth. The removing of that uncertainty around Brexit needs to get done as fast as possible.
Charles said that ClearBank have been really fortunate in regard to COVID-19. He mentioned the importance of being able to show empathy and the whole culture of the bank in relation to the human aspects of what’s happened in the UK in the world. But in relation to ClearBank, they have had an amazing run. He explained that a week before lockdown, back in March, they had 259 employees in the UK and everyone went on to remote working and they continue to be working from home, they have opened their Bristol and London offices for those that wanted to go into the office in the last few weeks, they had seven or eight people in terms of locals that have actually gone into the offices. If we go into many lockdowns, they will look at whether they will leave those open. But, of their 259 employees, Charles said they’ve done an amazing job in working from home and being a latest cloud tech enabled bank, remote working has been second nature to all of them. They have onboarded new employees and furloughed no one. He said they have onboarded six to seven new financial institutions each month throughout that whole period, they have had record volume weeks, record onboarding, and they have got tremendous momentum in the business. Part of the challenge they have had with working from home is with their tech teams, for example, the average age is 25, actually educating them and looking after their well-being of not sitting in front of a screen at home for 14 hours. Traveling to work, coffee machines and then going and getting a sandwich at lunch, naturally, it breaks up the day and teaching people how to look after themselves and not burn out through remote working, are some of the challenges they have actually had with their workforce rather than furloughing or worrying how they get where they are going to make a revenue and keep the electricity bill for next week. So, they have been very, very fortunate in terms of what they have done, but Charles added that it’s really down to the team and their tech that’s enabled them to actually operate that way.
Charles said that they have absolutely had to balance talking about their successes and being empathetic to other businesses in the current climate. He explained that he talks a lot about culture of the bank, and was privileged at the start to help try and build that culture, he wanted to try and make the cliches real in relation to transparency, honesty and integrity and telling it the way it is, trying to live that within the firm. One of the things that he feels very strongly about is egos and arrogance, one thing he cannot stand is, is any form of arrogance. Therefore, they have not been shouting about all of their recent successes. He believes that they have always got so much more to do, to improve. For example, how can they service their customers? Charles said they are honoured to have the customers they have. ClearBank still has a lot of ambition, a lot of vision that they want to do and to the extent of this constant learning of how they can get better in terms of resiliency and servicing their customers, that’s very much the ethos. It is a balance. They celebrate their successes as a team, but at the same time, they keep their feet very firmly on the ground in terms of running as good as the payments they settled yesterday and they will tomorrow, and that is very much part of their culture.
When asked how they go about embedding that culture into the business, Charles explained that they had a very fortunate position in that they have built it from scratch. For example, with their tech, they have got no legacy IT, their COO, Nigel Walder, who’s worked at all the large banks, every time he talks to the community he says what a privilege it is to have no legacy and try and keep it that way. They were able, therefore, to build the culture from scratch. Charles added that in his 35 years around investment banks and retail banks and wealth management, he has seen the good and the bad and the rest. So, in taking up this mantle, ClearBank as an Exco team to him essentially defined their values and how they wanted to operate the bank in a very modern, fintech, flat structure. The values that they all feel are very important, it being a regulated financial institution, having a banking license, they also wanted to mix the fintech creativity and innovation with the senior managers regime and all the rulebook of being a bank. Those two aren’t necessarily complementary, they have tried to make them so. But rules and restrictions may restrict that creativity and innovation and they have had a really big challenge within the bank to actually get the best of both worlds. But the embedding point, it starts from the top in terms of their team, they don’t want to keep recruiting people that are like them, they want all the inclusion and diversity. They want them to share the same values, but actually think and act and everything else be very different and unique in what they bring to the party but buy into sharing those values.
Charles said that he does talk to every new joiner about those values, experience and what matters, and through reinforcement of all code of conduct, which sounds old fashioned in a very ‘big bang’, but reinforcing those every day, whether it’s stand ups among the team or virtual pub quizzes or charities or downtime or hackathon, or the way they operate management committees or indeed boards.
It’s reinforcing those behaviours and actually trying to get rid of those the ones that they don’t like such as bureaucracy or people who won’t make decisions or people who don’t tell it the way it is and it’s ‘fluff and bluff’. What are the facts, make a decision, iterate and go. Everyone talks about culture and that you can’t be in a rule book, you’ve got to live it. You’ve got to try and live it and make it real. That’s what they have tried to do and reinforce it as you get bigger, because as you get bigger, it gets harder to maintain all those things we love in relation to small things and innovation and speed of decision making. The more people and the more clever people you get, the more opinions you get, it slows a lot down and ClearBank are going through those pains and trying to make sure they retain the things they love as they grow. That comes from strength throughout the whole organisation, not just from what Charles may say at the top or what he values, it’s top to bottom with everyone actually trying to live it day to day.
Charles said that they have had to adapt and develop new techniques to communicate their culture. He said that not only is it a challenge for him, but its also challenge for everyone living on Teams, Zoom or WebEx, whilst the productivity may be going higher, you lose all the social interaction, you lose that welcome at the lift and the small talk around the whole meeting and interaction and talking to people and all that physical aspect. The longer it’s gone on, that certainly has become more of a challenge as each meeting is work focused. They have had to invent a whole load of new techniques, as a number of other great companies have too. At ClearBank they have a stand up every Thursday at five o’clock for the whole bank, various Exco members or Charles will talk about various different topics, they have carried on doing that virtually with everyone on Teams. But then they have supplemented that with the likes of virtual pub quizzes or virtual hackathons, even to the extent of virtual gyms and yoga classes. All of those things, to try and get people to interact, and in the last few weeks and months they have been doing, subject to the rule of six, going into people’s patios or one on one performance appraisals and going to someone’s house to actually do it and creating that interaction. But it is it’s a real struggle. Charles explained that they had to have their board meeting and offsite virtually for two days. They would have had board dinners, Exco mixing with their investors and boards, all that social down time space where you talk about ‘how’s your family’ or ‘how are you feeling’ or ‘what’s going well and not’ as compared to ‘right, we’re talking about this’, you have to work really hard at creating those forums. ClearBank have also used surveys extensively, which people can view negatively, but they are really trying to get people to speak up about how they’re feeling or their mental health or loneliness or what makes a difference or what they need and looking after them. Charles believes that his HR team and Exco team have done some really great work on listening and how they can actually change things as it’s become evident this is going on longer and longer. So, those that didn’t have proper workstations and were flat sharing and operating out of their bedroom, not just the practical aspects, but also all the help lines and wellbeing and classes. So, a tremendous challenge and not easy to do it well. Whatever you’ve done, you’ve got to keep doing a lot more, and particularly the longer this goes on.
Charles explained how one of his colleges has a check in with his team in the morning and in the afternoon, where they do not talk about work, in order to add in those breaks which are lost when working from home. He said they talk about other things for that half an hour in the afternoon of how they’re feeling, anything to do with sports or anything they want to talk about and then they’ll have five minutes chatting about work at the end. Charles thought that was a great idea, where deliberately in the afternoon, they will just have a free format, bring a cup of tea and just have a chat about anything. It’s really important.
Charles said how he grew up at Hambros in the Barings crisis, when Nick Leeson ‘blew up’ Barings in relation to his Singapore activities. He saw what happened there as well as the last financial crisis in relation to NBS and the whole debt in the US and contaminating the balance sheets of banks throughout the whole world and that turning into a financial crisis. But, actually seeing at the end of the day, this is not just banking its people. He explained how he grew up on the trading floors, with ‘A types’ and the stereotypes in relation to all of that. You learn a lot fast, you learn about how clever people can be and why the world had to change in relation to bullying behaviour and calling it out that someone can make £50m a year but actually, as an individual doesn’t know how to behave, doesn’t know how to treat other people and that is being looked upon as acceptable because of the amounts of money that they’ve made. And then what happens in terms of the size of their bonus? Is there a surprise there’s an issue with the city and bankers and bonuses with all of those behaviours that then flowed from it? So, in that sense, bankers have brought it on themselves. The world has changed. He added that back at Hambros, there used to be seven different grades of staff restaurant, depending on your status and hierarchy. ClearBank has no hierarchy whatsoever. Charles doesn’t have a large office; they all sit together and it’s not about titles. Having seen some of those behaviours of arrogance and bullying, he wanted to adapt that in terms of a fintech innovative culture and make it all about team, put the customer together with all the functions in the bank and iterate and evolve something, something great has got to happen if you’ve got the right mentality of it. He believes that that’s so much better than having the management on the seventh floor and all the other businesses at one, two and three and they get called up to the seventh floor when they’ve done something wrong. That doesn’t breed innovation and creativity. It’s something that Charles is quite passionate about. They’ve tried to root out those type of behaviours for the way they want the bank to operate. Charles has been very keen in trying to lead the bank by example, he will not tolerate those behaviours and no one else should. And that’s how they have grown the culture within the bank.
The UK have got one of the best fintech industries there is. Charles said it’s quite incredible, when he got involved having been in large banks all his career, watching the fintech explosion, he gave credit to the PRA, the Bank of England and the PRA FCA and having a competition part of their mandate, the new banks development that the PRA have of looking at the number of new banks that have come through, including the Starling’s and Monzo’s and obviously ClearBank themselves. The UK has been fantastic in relation to all of that, but there’s a number of other areas around the world, equally, Israel is another great example where they have got an amazing fintech scene, not one that shouted loudly, but anyone who knows the world, all the support that they’ve been given. Also, for their regulatory environment, the Netherlands is a good example. Others that don’t have that mandate in terms of either their central bank or their regulators find it very, very hard to encourage, thrive, regulate and bring through new regulated fintech businesses. Ireland is a good example of that, they had the financial crisis, The Central Bank of Ireland does not have a competition and found it very hard to embrace new digital banks regulatory, albeit their former government wanted Ireland to be open for business and new jobs. You have to have it all aligned to create that overall environment for those fintechs to actually thrive and survive and go on and strengthen. Charles believes that there are some really good pockets around the world, but there are also some great opportunities in the US and elsewhere, Asia has led very strongly across the West who are still much more in development, if, of course, COVID-19 and the recession doesn’t actually kill off some of that in the short term. ClearBank are not competing directly with the likes of Monzo or Revolut, they can potentially service them in relation to payments infrastructure. Charles said that of course they do collaborate, whether it’s the PRA CEO annual conferences or a number of other events, he explained how there is a network, but it’s all totally professional, for those that they are directly competing against, it’s a very healthy professional relationship. He is pleased with the relationships that we have in the UK scene and others where the landscape is there, and they can compete. The issue has been the fintechs and the loss-making banks against the big four as COVID-19 is come in, is that a level playing field? The flight to quality and funding rates and regulation, does it go bias back in the favour of the big four rather than the newcomers when things get difficult? ClearBank has aligned to a number of those initiatives where they feel there should be more support from the fintech through difficult periods.
Charles believes that people will have recognised the risk of building a business in the current economy and the credits environment are actually tightening, it’s easing slightly. But capital, funding investors and actually using their capital, fintech is consuming a tremendous amount of capital in terms of new capital. If you can’t get that, then he has seen a number of fintechs that actually had to stop, they ran out of money and couldn’t get that investment. Therefore, ClearBank took actions of tightening their belts in terms of costs and capital conservation, that’s being responsible and running a loss. Making fast growing business, you take those actions regardless and don’t become complacent in your investment or investors and funding. Like any tightening of financial crisis or anything that happens in nature, the weakest don’t survive. Therefore, you’ve got to be additionally agile and strong and take the tough decisions to get through and become sustainable. Charles’ advice would be to take the responsibility, start at home in terms of owning your own risk, owning your own cost base, being ruthless in relation to the success of your proposition, if you’ve got a conviction and belief and you’ve got the team and the proposition is sound, you’ll find that investment, but it’s really hard and you’ve got to fight hard and you’ve got to be ruthless as to whether it’s working or not. Yes, you want passion and emotion, but you also need really harsh financial common sense. If a proposition is actually not going to stand long term, you will not find investment for it. Change tack and find one that does.
So much has been written on leadership and it is a topic that Charles is personally interested in. It’s fine when things are going well and customers are happy and you’re making money and want to be slightly more complacent, a lot’s been written about how you should be managing as if you were in a state of crisis when you’re not. Because on the basis you’re not, it’s only a matter of time before things are actually going to go wrong. So, bringing your A game to work every day as a mantra is something that is very hard to do. He said it’s like Premier League football in terms of consistency. Can you play a level of intensity on a consistent basis? He certainly tries to do that. Charles added that he does enjoy being a spokesman of the company, but it should never be about one individual. His Exco team, such as Nigel Walder, Simon Jones and others carry the load to other panels, external views and showing the strength and depth of the company to show it’s not a one-man band and any leader knows you’re only as good as the team behind you. In relation to that presidential messaging and communication role, it is really important. In the early stages, it was much more inward looking in relation to actually getting the proposition to work, servicing those customers and let the product speak for itself. Charles said that he has never been very good as a software salesman, the product has to do the sell and you need the trust and integrity of the people around it, you do business with those. That’s very much the model. He believes that doing too much in terms of speaking is not a good thing. It’s got to be the product doing the speaking, not the management team. The other aspect in terms of leadership skills, and very important during COVID-19, has been empowering down, faster decision making, not let the top suffocate the business and let your people shine, let them come through, empower them, give them the direction, but let them go. Put the cheques and balances and monitoring around that. That’s what leadership is about, not all about the people at the top. It’s about them and growing and creating that team in alignment to let them do their thing. That’s what Charles takes most pride in, not how good he is as a presenter, he’s constantly trying to improve in relation to presentation and communication.
Another big bank issue over the years, Charles explained, was going back to his career where you used to have to focus constantly on appraisals, on weaknesses, got to work on your weaknesses, ignore your strengths just focus, you’re not very good at this. So, you must work at it. As modern leadership theory is growing, you can’t teach an old dog new tricks. He said that now it’s all about focusing on your strengths, being cognisant of your weaknesses and development points, but now it’s not weaknesses it’s all challenges, development points.
Charles said how he has always wanted to develop more in public speaking and communication and do better. But he thinks there’s a base level getting on with people, and being able to talk to them in an authentic way, on their level, he believes that it is so important in communication and leadership and being in touch. It’s political awareness, EQ, body language and saying the right thing or the wrong thing at the right time. You see the politicians, the stress they’ve been under of saying the right thing or wrong thing. But you’ve got to learn to do that and be authentic as part of that process. Charles added that you can get lost in facts, the ability to story tell and make sense of it all and then interject the facts is something a lot of leaders try to do. Can they relate and tell that story and interject facts rather than lose the audience in boring, dull, boffin like facts and not being able to put it together. Storytelling, and that’s not fake news or anything else, of authentic storytelling with interjection of facts, is something that is a real skill as a leader.
Communicating internally is another challenge on the basis of making sure it’s at the right time, it’s relevant and they take enough time to get it right. In a fast paced, moving environment, making sure you’re still connected to the people that really matter. So, whilst innovation and agile means that people are used to change, the majority of us still don’t like change. Charles explained that it’s either hard work or something different or you’ve got to think about it and they want everyone to love that and embrace it. People have opinions, so we work hard as an Exco team in thinking about the impact of making a change and communicating it and understanding how people will react to it and not over rotating, but making sure they have all thought about it, because what they might think about it, the receiver of communications is different from the person that’s actually delivering the message. He said they put a lot of work in trying to think through all the angles and from their perspective, what is it they want? What do they need to know? Are they giving them the right tools and information in doing that? He admitted that they don’t get that right all the time, but they work very hard at it to make sure you put yourself in the position of the receiver and don’t get lost in ‘this is the message we must tell them, and this is what they need to know’. To make it land, it’s got to be understandable, like any communication in terms of the receiver. And so, they work really hard at delivering that in the right forms, such as one to ones, the social setting, or the work setting. It’s hard work to do it well, it really is.
Charles said that the team’s the biggest feedback is that they are really missing the social interaction of being together. They can create that on Microsoft Teams and everyone having a lot of fun looking at people’s pets and their decor or their bookcase in the background or the different clothes that they’re wearing, of getting to know each other in terms of the different settings. But the thing that most of the team yearn for is actually to be together with their team. Where they used to be all together in the room and having a drink and a teaching or stand up on a topic or someone talk about something they’ve done with the client or sharing in that interaction, that’s the one that Charles believes that they have got to work really hard on and indeed looking forward in terms of property footprints. Is this going to be a lasting change? People have enjoyed the remote working and would do that for one or two or three days a week, but they need space for the other two days a week where they can actually get together as a team, and what space they need to do that. That’s not all just workstations for everyone, it’s a different type of space. Charles said that they have a team looking at that for them on a go forward basis to get that balance, to address the social interaction, the physical interaction to people going forward. He doesn’t think that they have cracked that yet.
Charles said that there is a number of cliche sayings, but they try to live them. They hit home with him, and he has used them within the bank in relation to some of the things that he thinks are really important. One of the examples, a former boss of his that used to take him around investment bank around bonus time used to say, ‘everyone, Charles is working so hard. I’m sick and tired of everyone telling me how hard everyone is working at this time of year. What we need to know, Charles, is who are the people that are actually moving the needle? Who are the people that are actually making the difference in this organization? And normally it’s 25% or 30%. Those are the people that we need to make sure we’re really looking after and actually empowering them and rewarding them and giving them the challenge to actually drive the organization forward’. When it comes to communication skills, in terms of dealing with more senior people than you, the drill that Charles used is as if you’ve got five minutes with god. So that’s all you have and going and seeing a senior person, you go in and you’ve got five minutes. What points are you going to make in your five minutes? You mustn’t come out and walk down the street and saying, ‘if only I’d said X or Y’. So, the succinctness, the clarity and actually the importance to develop that skill that you’ve only got X time to make your point what are the messages, everyone has got to hit home. So, the five minutes with whoever it is, are the most important of your life and making those messages that will help your communication skills, of focusing on the true things you want to say and why you want to say them. And no regrets. Never have regrets.
Charles said that from his perspective, two things come mind when asked what he would say to his younger self. He explained that it’s very easy when you’re young and you’re ambitious, you’ve got that drive, it’s part of that enthusiasm to actually listen. Every good leader, exceptional leader no less, has got to be a good listener. If you listen and you process and you analyse, he thinks you’re much better. You may have your own conviction, but in challenging yourself by listening, you will undoubtedly do much better in terms of your arguments. Charles thinks that he would have listened even to those people that matter, and you don’t know who they are either.
The second thing that Charles is passionate about, that he doesn’t think he has been good about, is decision making; the procrastination and analysis paralysis. Get your best people together, get all of those views, but make a decision and have the conviction to then change it if you’re wrong and keep going. That used to be seen as a weakness. Again, you’ve seen the leaders on the basis that people hate people changing their minds, it’s a tremendous weakness. But Charles doesn’t view it as such if you know what you’re doing, if you’re incompetent and don’t know what you’re talking about, that’s a different issue. But if you have some idea, then you need to process and make decisions and be prepared and strong enough to change it and get better. Rather than, ‘no, I mustn’t, I’ve got to stick in the mud, it’ll be seen as a weakness.’ People help change. The world is moving so fast, the tech is moving so fast. You’ve got to be agile and admit when you’re wrong and move and change and go again. So those would be the two things he would say to his younger self; listening and speed of decision making.