There's a secret
right at the heart of banking,
and it's been
hiding in plain sight for decades.
And that's that the very banks
who were meant to serve the global
financial system,
have been clogging it up needlessly
with layers of complexity and risk.
The Bank of London started with
one simple question.
The system is broken, how do we fix it?
One of the things
that we all learned
from the financial crisis
was the degree of interconnectivity
of the entire financial system.
Large bank, small bank,
retail investor,
institutional investor,
retail client,
the man, the woman on the street.
Going to work every day
with their 401k's declining.
All of a sudden,
the financial system,
we all became aware,
was completely interconnected.
And as a result, risk could transfer
in an interconnected way.
And since then, tremendous gains
have been made
in capital
and liquidity
and vast aspects of the financial system.
Having said that,
there is a massive amount of work
to be done in a complex, nuanced
part of the market
that deals with payments
and money transfer.
Payments is really a
shorthand for a whole range
of related activities and transactions.
The most critical of these
is clearing and settlement.
The clearing bank
market is probably the area of
even people
that have been in banking for years
don't understand.
It is really the heart
and the lifeblood of the banking system,
but it's also one
that has really been marked
by inefficiency.
The global payments,
clearing and settlement
systems are not currently
fit for purpose.
These systems are too expensive.
They take too long to come to settlement.
There isn't an alternative.
Messaging, payments
and liquidity are all on different rails,
and cross-border
payments are encumbered
by a chain of correspondent banks.
And all this is exacerbated
by systemic settlement risk
and the real burden of failed payments.
Until recently, this was a closed club.
Just between the UK,
the EU
and the US, less than 100 banks control
75% of the world's spendable money.
That's approximately $2.5
quadrillion annually.
In the UK alone,
There are £750 billion worth
of transactions processed every day,
and in the main,
these go through just five banks.
I often call this the nightclub issue.
In banking,
the reason the markets work
is because everybody else is there.
The reason the networks work
is because everybody else is there.
And so yes,
if you go to a nightclub
and you've got lousy
music and lousy drinks
and so on,
you still go
because everybody else is there.
And right now,
most of the payment schemes
and the ways that we transfer money,
were built in the seventies,
eighties, nineties and
only modestly upgraded.
There's been a bunch of fintechs
and other participants
who've done a really good job
innovating around the edges,
but they're really stunted
because to bring real innovation,
you have to innovate in the core
and you can only do that
if you're a clearing bank.
But even they really struggle with this.
It would be like trying
to change the engine
of an airplane mid-flight.
They have a tremendous
amount of complexity
because they've been built up
and amalgamated over time.
You just can't replace everything,
if you would.
They've got no reason to change.
The customer can be frustrated,
but they don't do anything about that
because the customer needs other things.
They need credit,
they need reporting, et cetera.
They didn't innovate for that reason.
They kept their systems antiquated.
They didn't move things in real time,
and they thought they were going
to have this monopoly for a long time.
And frankly,
we live in a free market society
and in a free market society problems
get solved by innovators.
I first met Anthony through a
friend,
and the minute
he walked through the door,
he made the problem very specific to me.
He says Mark "Every time
you transfer money,
that's a frustrating process
and a costly process, right?"
I said, "Yep".
"Well we're going to build
at the Bank of London,
a product
that is going to take that problem away,
and we're going to be able
to instantaneously transfer
money and revolutionize
a significant component
of the financial services industry".
And I said, man if we can change that,
we have a winner on our hands.
The Bank of London is not just
another new bank.
We're the world's first,
purpose built, global
clearing agency and transaction bank,
the likes of which the world
has never seen before.
From next generation treasury,
payment versus payment, payment
versus delivery,
right through to atomic settlement.
And that's just a fraction
of what we bring to market.
In essence,
we have built a platform
that allows us to leverage
the existing networks,
yet provide a tremendous amount
of additional capabilities.
Our unique patented innovations
cover the principal risk factors
across payments, clearing,
settlement, compliance and disbursement.
One of the first things
that got us excited
is the ability to take cost
and reduce it by 80, 90%.
And in general, people at the beginning
tell you, you know,
we're kind of happy with what we have.
Until you show them
what you could have, right?
And when you show them
what you could have,
which is faster, better,
stronger, cheaper,
then fundamentally people go hang on.
Yeah, the door's wide open,
come and help us change.
The Bank of London
will transform
the financial industry
for everyone's benefit.
You can deliver to your customers
the products and services
that you actually want to.
You're no longer
constrained by the limits
of your current banking partner.
By working with us as a customer
you're going to be able
to service your customers better,
be able
to address the movement of money
between all of the major corridors,
be able to move that money in real time,
be able to apply
the best of breed in terms of compliance
and related technology on top of that,
to make those transactions
more transparent,
to make them better for regulators
and to make them faster.
I think we're at a point right now
where people truly understand
the criticality of the need for safety,
when it comes to payments and clearing.
Settlement
risk is the largest risk
within the financial industry.
This is a huge addressable market
and a real opportunity to disrupt.
The Bank of London is uniquely positioned
to provide a truly disruptive solution
to a market
that is begging for a solution.
We are going to finally bring disruption
to the very fundamentals of banking,
making it safer, in the process.
We have a very sound long-term vision:
to build
the brand new yet
long-term sustaining
clearing bank of the future.
And I would say
innovation is woven into everything
we do
psychologically, technologically,
it's the lifeblood of our business.
One of the many failures of the global
banking industry is
they only really asked themselves
one question,
and that question was: "Where
will the future of banking take us?"
When they really ought
to have asked themselves: "Where
will we take the future of banking?"
That's what we're here to
solve at The Bank of London.