The Total Economic Impact™ Of ClearBank Embedded Banking
Cost Savings And Business Benefits Enabled By Embedded Banking
A Forrester Total Economic Impact™ Study Commissioned By ClearBank, July 2024
Banking-as-a-service (BaaS) solutions empower fintech organisations to seamlessly integrate banking capabilities into their platforms, accelerating time to market and innovating at speed while reducing development costs. ClearBank, a fully licensed UK bank, offers BaaS capabilities through an Embedded Banking proposition delivering secure, stable access to innovative banking infrastructure that lets firms enrich their proposition, including the ability to offer Financial Services Compensation Scheme (FSCS)-protected accounts. Organisations use ClearBank’s license to offer tailored financial services, improve customer experience, and drive growth on their terms.
ClearBank Embedded Banking enables firms to access UK banking infrastructure (bank accounts, savings accounts, and access to payment schemes). As a result, these firms can offer a variety of services without facing the process and costs of becoming a bank themselves. For instance, ClearBank’s customers can indirectly offer FSCS-protected accounts by leveraging ClearBank’s banking license. ClearBank offers embedded products that underpin its clients’ environments and their customer-facing portals, allowing them to deliver tailored, compliant financial services products.
ClearBank commissioned Forrester Consulting to conduct a Total Economic Impact™ (TEI) study and examine the potential return on investment (ROI) enterprises may realize by deploying Embedded Banking.1 The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of ClearBank Embedded Banking on their organisations.
Return on investment (ROI)
90%
Net present value (NPV)
£4.8M
To better understand the benefits, costs, and risks associated with this investment, Forrester interviewed three representatives, all from FCA-regulated firms, with experience using ClearBank Embedded Banking. For the purposes of this study, Forrester aggregated the interviewees’ experiences and combined the results into a single composite organisation that is a fintech organisation offering digital investment products, with about 200,000 customers and revenue of £24 million.
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Interviewees said that prior to using ClearBank Embedded Banking, their organisations either partnered with other embedded banking providers or operating under an Electronic Money Institution (EMI) license. However, dysfunctional partnerships and the limitations of the EMI license led to innovation delays, operational inefficiency, and customer trust issues.
After the investment in ClearBank Embedded Banking, the interviewees accessed innovative banking infrastructure, leveraged ClearBank’s full banking license to offer new tailored banking products (e.g., FSCS-protected bank accounts or instant-access savings accounts), and improved customer retention.
Key Findings
Quantified benefits. Three-year, risk-adjusted present value (PV) quantified benefits for the composite organisation include:
- Increased incremental profits of £9.7 million from product expansion and cross-selling. ClearBank’s Embedded Banking solution allows the composite organisation to offer instant-access savings accounts to its existing investment customers, onboard net-new customers via savings accounts, and cross-sell investment accounts to them.
- Retained 3% more customers. Faster inbound and outbound payments, FSCS protection, and improved user experience reduce the composite organisation’s churn rate.2 Its customers invest and deposit money more confidently since their deposits are, subject to eligibility, protected up to £85,000. They can withdraw money instantly and use Confirmation of Payee (CoP) before completing a payment transaction, providing additional certainty that funds have been sent to the correct account.
- Saved nearly £63,000 through the reduction of service desk tickets. The composite organisation’s customer services team experiences a 10% reduction in monthly service desk tickets opened by customers.
Unquantified benefits. Benefits that provide value for the composite organisation but are not quantified for this study include:
- Improved support and strategic partnership. Interviewees’ organisations perceive ClearBank as a strategic partner that is always willing to understand what its customers want to achieve and how it can support them.
- No direct-to-consumer competition. Interviewees highlighted that ClearBank empowers them to offer better services and experience to their customers, without competing directly with them for retail customer deposits.
- Transparent know-your-customer (KYC) process. ClearBank owns the KYC and customer due diligence process and sets the minimum standards it expects of clients, as it maintains regulatory accountability as the banking license holders. It allows the customer-facing aspects to be managed by clients, enabling them to oversee and interact with their customer base in an approach consistent with their existing user experience. However, each client must adhere to ClearBank’s minimum standards and cooperate with the bank’s oversight requirements on an ongoing basis.
Costs. Three-year, risk-adjusted PV costs for the composite organisation include:
- Implementation costs amounting to £582,000. These are the costs of the internal resources needed to implement ClearBank Embedded Banking. This equates to 10 FTEs devoting 100% of their time to the implementation for nine months.
- ClearBank Embedded Banking platform costs of £3.8 million over three years. This includes the composite organisation’s access to ClearBank’s core functionality, maintenance of accounts powered by ClearBank, and the cost of payment transactions. Platform fees constitute the biggest component of total costs and vary based on the organisation’s annual volume of accounts and payment transactions.
- Additional operational costs of nearly £889,000. ClearBank provides the underlying infrastructure, while its clients manage customer-facing operations and processes (e.g., customer onboarding and KYC, as well as ongoing transaction monitoring) through an outsourcing and oversight arrangement. The composite organisation invests in innovative tools and hires additional FTEs to more efficiently manage ClearBank’s oversight of outsourced processes. Organisations that already have mature customer-facing processes in place, advanced tools, and sufficient FTEs may not incur all of these costs but will need to ensure that their processes and controls continue to meet ClearBank’s standards.
The representative interviews and financial analysis found that a composite organisation experiences benefits of £10.14 million over three years versus costs of £5.35 million, adding up to a net present value (NPV) of £4.79 million and an ROI of 90%.
Incremental profits from product expansion and cross-selling
£9.7 million
“I’m very confident that whenever there is a new feature that is market-standard, ClearBank will equally adopt it, or they will be the frontrunners to adopt new features. That has already made our customer experience much better because our clients get the experience they would expect to see in such a financial setup.”
Chief of staff, fintech
Key Statistics
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Return on investment (ROI)
90%
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Benefits PV
£10.1M
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Net present value (NPV)
£4.8M
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Payback
10 months
Benefits (Three-Year)
Business growth Improved customer retention Service desk tickets cost savingsTEI Framework And Methodology
From the information provided in the interviews, Forrester constructed a Total Economic Impact™ framework for those organisations considering an investment ClearBank Embedded Banking.
The objective of the framework is to identify the cost, benefit, flexibility, and risk factors that affect the investment decision. Forrester took a multistep approach to evaluate the impact that ClearBank Embedded Banking can have on an organisation.
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Due Diligence
Interviewed ClearBank stakeholders and Forrester analysts to gather data relative to Embedded Banking.
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Interviews
Interviewed three representatives at organisations using ClearBank Embedded Banking to obtain data about costs, benefits, and risks.
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Composite Organization
Designed a composite organisation based on characteristics of the interviewees’ organisations.
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Financial Model Framework
Constructed a financial model representative of the interviews using the TEI methodology and risk-adjusted the financial model based on issues and concerns of the interviewees..
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Case Study
Employed four fundamental elements of TEI in modelling the investment impact: benefits, costs, flexibility, and risks. Given the increasing sophistication of ROI analyses related to IT investments, Forrester’s TEI methodology provides a complete picture of the total economic impact of purchase decisions. Please see Appendix A for additional information on the TEI methodology.
Disclosures
Readers should be aware of the following:
This study is commissioned by ClearBank and delivered by Forrester Consulting. It is not meant to be used as a competitive analysis.
Forrester makes no assumptions as to the potential ROI that other organisations will receive. Forrester strongly advises that readers use their own estimates within the framework provided in the study to determine the appropriateness of an investment in ClearBank Embedded Banking.
ClearBank reviewed and provided feedback to Forrester, but Forrester maintains editorial control over the study and its findings and does not accept changes to the study that contradict Forrester’s findings or obscure the meaning of the study.
ClearBank provided the customer names for the interviews but did not participate in the interviews.
Consulting Team:
Corrado Loreto
Drivers leading to the Embedded Banking investment
Interviews
| Role | Industry | Region | Offerings |
|---|---|---|---|
| Chief of staff | Fintech | United Kingdom | Savings marketplace |
| VP of product | Fintech | United Kingdom | Savings and investment platform |
| Chief product officer | Fintech | United Kingdom | Digital investment platform |
Key Challenges
Prior to using ClearBank, two interviewed customers operated under an EMI license, meaning they could not hold customers’ deposits. They were unable to pass interest back to customers, which limited the benefits of the savings products they operated. They also relied on manual processes and faced operational issues alongside challenges associated with customer communication management.
The interviewees noted how their organisations struggled with common challenges, including:
- Cumbersome operational processes. Interviewees’ organisations struggled with inefficient reconciliation processes, lacked robust ledgers, and had poor control over customer data. They faced high costs associated with FTEs needed to deal with manual processes.
- Dysfunctional partnerships with embedded banking providers. One interviewee described how their organisation used another embedded banking provider prior to ClearBank but was unhappy with the partnership. The provider did not invest in innovation, undermined the customer’s initiatives to develop new products, and had an ancillary business that was in direct competition with the interviewee’s business.
Solution Requirements/Investment Objectives
The interviewees’ organisations searched for a solution that could:
- Enable the organisation to offer FSCS-protected accounts to enrich their value proposition and expand their customer base.
- Enable the organisation to pay interest on customers’ deposits and deliver a competitive proposition.
- Access cutting-edge banking infrastructure that would let them innovate, grow, and stay ahead of the competition.
- Enable the organisation to offer a seamless user experience to meet tech-savvy customers’ expectations.
“We did have faster payments, but it didn’t work with our previous partner all the time. If it takes a couple of days, customers get nervous and call our customer service. Then, they’re less likely to proceed to invest or deposit money on the platform because they feel it doesn’t work properly.”
Chief of staff, Fintech
The Avoided Costs Of Becoming A Bank
Interviewees told us that they had never planned to become a bank due to high costs and lengthy processes. Instead, they emphasized that investing in ClearBank Embedded Banking was a more cost-effective option.
Forrester estimated that a new fintech organisation (with the same characteristics as the composite) planning to become a bank would save roughly £17 million over three years by investing in ClearBank Embedded Banking. The costs avoided include the full banking license application fees, the minimum capital required by BoE, a team of 10 FTEs devoting 50% of their time to the project for 18 months, the compensation for three C-level executives hired as part of the application process, and the cost of SaaS core banking infrastructure needed to run the bank.
However, for an organisation that already offers financial products and with an existing customer base applying for a bank license, these costs would be substantially higher due to extra capital requirements.
Composite Organization
Based on the interviews, Forrester constructed a TEI framework, a composite company, and an ROI analysis that illustrates the areas financially affected. The composite organisation is representative of the three interviewees, and it is used to present the aggregate financial analysis in the next section. The composite organisation has the following characteristics:
Description of composite. The composite organisation is a UK-based fintech company offering a digital investment platform. Prior to implementing ClearBank Embedded Banking, the composite generated £24 million in annual revenue. It has 200,000 active investment accounts, each with an average value of £12,000, and pays an investment management fee of 1% billed annually. The organisation recently started offering FSCS-protected instant-access savings accounts powered by ClearBank. The average value of instant-access savings accounts is £7,000. The composite currently retains 0.25% interest margin from each savings account.
Deployment characteristics. The composite organisation could not hold deposits or pay interest prior to partnering with ClearBank. It deploys ClearBank Embedded Banking to scale up its business, offering FSCS-protected (subject to eligibility) instant-access savings accounts. It owns customer-facing operations and processes that ClearBank requires its clients to run, such as customer onboarding, including KYC and customer due diligence, account creation, transaction monitoring, and complaint processing.
Key Assumptions
- £24 million revenue
- 200,000 investment accounts, growing to 440,000 in year 2 and 560,000 in Year 3
- £12,000 average value of investment accounts
- 1,065,600 instant-access savings accounts opened by Year 3
- £7,000 average value of instant-access savings accounts
Quantified benefit data as applied to the composite
Total Benefits
| Ref. | Benefit | Initial | Year 1 | Year 2 | Year 3 | Total | Present Value |
|---|---|---|---|---|---|---|---|
| Atr | Business growth | £1,966,140 | £4,007,124 | £6,122,952 | £12,096,216 | £9,699,337 | |
| Btr | Improved customer retention | £114,048 | £156,816 | £199,584 | £470,448 | £383,230 | |
| Ctr | Service desk tickets cost savings | £16,200 | £25,920 | £35,640 | £77,760 | £62,926 | |
| Total benefits (risk-adjusted) | £2,096,388 | £4,189,860 | £6,358,176 | £12,644,424 | £10,145,493 | ||
Business Growth
Evidence and data. ClearBank Embedded Banking enabled interviewees’ organisations to offer new services to customers. Organisations leveraged ClearBank’s full banking license to offer current accounts or savings accounts protected (subject to eligibility) up to £85,000 by FSCS, the UK’s deposit guarantee scheme. One interviewee highlighted that ClearBank offered a more cost-effective revenue model than other embedded banking providers, which let their organisation earn revenue from the deposits held within accounts powered by ClearBank. Interviewees also noted that they had a certain level of personalisation and could still brand the accounts despite their being powered by ClearBank.
- The VP of product at a fintech organisation said: “We’ve offered a new variety of products with ClearBank, which allowed us to brand the products. This is the first time we’re able to do that. This is one of the reasons why we chose ClearBank Embedded Banking rather than other solutions we could have gone with: We wanted to continue to have a degree of personalisation of our own app. We wanted to be [our brand] and not have to plaster the name of a different partner all over the app.”
- The chief product officer at a fintech organisation noted: “We’re now offering savings accounts. Initially, we targeted our existing investment customers that we knew were holding cash deposits somewhere. We offered them savings accounts to deposit the cash buffer they could invest. That has been successful as we saw a net increase in assets held by us. Our next phase is external marketing.”
Modelling and assumptions. Based on the interviews, Forrester assumes the following about the composite organisation:
- Initially, the composite organisation has 200,000 active investment accounts.
- Three percent of existing investment account holders open an instant-access savings account each month.
- Each month, 20,000 net-new customers open an instant-access savings account. Fifty percent of them open an investment account as well.
- The average value of investment accounts is £12,000. The composite charges a 1% annual fee to manage each investment account.
- The average value of an instant-access savings account is £7,000. The composite retains a 0.25% interest margin. The overall interest rate is linked to the Bank of England (BoE) rate.
- The composite has a profit margin of 11%.
Risks. The value of this benefit may vary depending on the following factors:
- The number of active investment and instant-access savings accounts.
- The average value of investment and savings accounts.
- Investment fees and BoE interest rates.
Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of £9.7 million.
“We have a way of working with other banking partners that allow us to earn a revenue share. But it’s what the partner is choosing to share with us, whereas the revenue model with ClearBank is that most of the revenue is for us.”
VP of product, fintech
Business Growth
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | ||||
|---|---|---|---|---|---|---|---|---|---|
| A1 | Total instant-access savings accounts opened | Composite | 312,000 | 667,200 | 1,065,600 | ||||
| A2 | Average value of instant-access savings account | Composite | £7,000 | £7,000 | £7,000 | ||||
| A3 | Interest margin retained for instant-access savings account | Interviews | 0.25% | 0.25% | 0.25% | ||||
| A4 | Cumulative incremental investment accounts | Composite | 120,000 | 240,000 | 360,000 | ||||
| A5 | Average value of investment account | Interviews | £12,000 | £12,000 | £12,000 | ||||
| A6 | Annual fee for investment account management | Interviews | 1.00% | 1.00% | 1.00% | ||||
| A7 | Operating profit margin | TEI standard | 11% | 11% | 11% | ||||
| At | Business growth | ((A1*A2*A3)+ (A4*A5*A6))*A7 | £2,184,600 | £4,452,360 | £6,803,280 | ||||
| Risk adjustment | ↓10% | ||||||||
| Atr | Business growth (risk-adjusted) | £1,966,140 | £4,007,124 | £6,122,952 | |||||
| Three-year total: £12,096,216 | Three-year present value: £9,699,337 | ||||||||
Improved Customer Retention
Evidence and data. ClearBank helped interviewees’ organisations improve customer retention by meeting tech-savvy customers’ expectations. Organisations could offer faster inbound and outbound payments, Confirmation of Payee, and a seamless user experience.
- The chief of staff at a fintech organisation told us: “If you have a certain expectation as a customer — and the UK customers are very tech-savvy — and a fintech you want to try out doesn’t meet it, you’re sceptical and probably might not close the registration — or never fund your first product.”
- The VP of product at a fintech noted: “We’re able to offer better user experience due to the technology behind ClearBank Embedded Banking, including instant withdrawals, faster payments, confirmation of payee, etc. This obviously keep users happier with their experience and less likely to churn. I would say that offering these services definitely helps with retention.”
- The VP of product at a fintech also told us that when they first worked with ClearBank, their churn rate was about 11%, but they were not offering any accounts at that point. Since they started to offer bank accounts powered by ClearBank, the churn rate fell to 3%. However, she also noted that part of this improvement is attributable to other services the bank offers outside of its partnership with ClearBank.
Modelling and assumptions. Based on the interviews, Forrester assumes the following about the composite organisation:
- The composite has 320,000 active investment accounts at the end of Year 1. The number of accounts grows to 440,000 in Year 2 and further to 560,000 in Year 3.
- The pre-ClearBank customer retention rate is 89%.
- Customers acquired in previous year(s) are retained at the current year’s retention rate.
- The composite has a profit margin of 11%.
Risks. This benefit may vary depending on the following factors:
- Previous performance and systems in place.
- Pre-ClearBank customer retention rate.
Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of £383,000.
“Our previous partner didn’t support Confirmation of Payee. When a customer pays in, it’s a good feeling to get confirmation that it’s your account. Without Confirmation of Payee, customers were just warned that the account could have been fake. If you onboard a new customer, that is a killer for conversion.”
Chief of staff, fintech
Improved Customer Retention
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|
| B1 | Total active investment accounts | Composite | 320,000 | 440,000 | 560,000 | |
| B2 | Customer retention rate before ClearBank | Interviews | 89% | 89% | 89% | |
| B3 | Improvement in customer retention attributed to ClearBank | Interviews | 3% | 3% | 3% | |
| B4 | Customer retention rate with ClearBank | B2*(1+B3) | 92% | 92% | 92% | |
| B5 | Average value of investment account | Interviews | £12,000 | £12,000 | £12,000 | |
| B6 | Annual investment fee for investment account management | Interviews | 1% | 1% | 1% | |
| B7 | Incremental revenue generated by retained investment customers | B1*B3*B5*B6 | £1,152,000 | £1,584,000 | £2,016,000 | |
| B8 | Operating profit margin | TEI standard | 11% | 11% | 11% | |
| Bt | Improved customer retention | B7*B8 | £126,720 | £174,240 | £221,760 | |
| Risk adjustment | ↓10% | |||||
| Btr | Improved customer retention (risk-adjusted) | £114,048 | £156,816 | £199,584 | ||
| Three-year total: £470,448 | Three-year present value: £383,230 | |||||
Service Desk Tickets Cost Savings
Evidence and data. ClearBank helped interviewees’ organisations reduce costs associated with service desk tickets opened by dissatisfied customers. Organisations noted that service desk tickets declined due to better services and features offered in partnership with ClearBank.
- The chief of staff at a fintech told us: “We did receive unprompted feedback on Trustpilot after we moved to ClearBank. A reviewer said: ‘Oh my god, this is now working. It’s so much faster. I can pay money into my hub account instantly.’ This is what’s behind the 10% decrease we experienced in the number of service desk tickets.”
Modelling and assumptions. Based on the interviews, Forrester assumes the following about the composite organisation:
- Prior to ClearBank, the composite processed 1,000 service desk tickets per month.
- The composite experiences a 10% reduction in the number of service desk tickets attributable to ClearBank.
- The costs of processing each service desk ticket amount to £15.
Risks. This benefit may vary depending on the following factors:
- The number of pre-ClearBank service desk tickets processed.
- Percentage reduction in the number of service desk tickets.
- Costs of processing each service desk ticket.
- Additional initiatives that improve services or product quality, or access to self-service.
Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of £63,000.
Service Desk Tickets Cost Savings
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|
| C1 | Average service desk tickets opened annually | Interviews | 12,000 | 19,200 | 26,400 |
| C2 | Share of monthly service desk tickets prevented due to ClearBank | Interviews | 10% | 10% | 10% |
| C3 | Total service desk tickets opened annually after ClearBank | C1-(C1*C2) | 10,800 | 17,280 | 23,760 |
| C4 | Average cost per service desk ticket | Composite | £15 | £15 | £15 |
| Ct | Service desk tickets cost savings | (C1*C4)-C3*C4) | £18,000 | £28,800 | £39,600 |
| Risk adjustment | ↓10% | ||||
| Ctr | Service desk tickets cost savings (risk-adjusted) | £16,200 | £25,920 | £35,640 | |
| Three-year total: £77,760 | Three-year present value: £62,926 | ||||
Unquantified Benefits
Additional benefits that customers experienced but were not able to quantify include:
- Improved support and strategic partnership. One of the interviewees highlighted that ClearBank’s team was very pragmatic and always tried to understand the organisation’s business model, what was important for them, and what they were trying to deliver to their customers. The interviewee emphasized that ClearBank was committed to understanding the organisation’s roadmap and how it could support new features or products they intended to develop.
- Eliminated direct competition. Two interviewees highlighted that ClearBank is not in direct competition with its own customers, since it has no business that goes directly to consumers. One of them noted that the lack of direct competition boosted trust in ClearBank.
- Increased transparency for KYC processes. One of the interviewees noted issues with its previous embedded banking provider. When customers were stuck in the onboarding process, their customer success team was not aware of the issues and unable to help the customers. ClearBank owns the process and sets the minimum standards because regulatory accountability remains with it as the banking license holder. Embedded Banking clients manage the process through an outsourcing and oversight arrangement that must be completed in accordance with ClearBank’s minimum standards and oversight requirements.
“We feel that ClearBank really wants to understand what’s in our roadmap and how they can support us. ClearBank is more a partner rather than a provider.”
Chief of staff, fintech
“ClearBank has no ancillary business that goes directly to our customers. We feel much more aligned with our long-term goals because we know they will invest in the accounts that provide us with and the payment facilities.”
Chief of staff, fintech
Flexibility
The value of flexibility is unique to each customer. There are multiple scenarios in which a customer might implement ClearBank Embedded Banking and later realize additional uses and business opportunities, including:
Scaling up business with tailored features and new products. Organisations described ClearBank as a partner that continually invests in its platform and is willing to cooperate with its customers to help them develop new features and products. For example, one client that initially implemented savings accounts has now also launched flexible Cash Individual Savings Accounts using the Embedded Banking platform.
They also emphasized that whilst they use ClearBank’s infrastructure, they can still personalize the products. One of the interviewees noted that their organisation’s previous provider not only did not invest in innovation but also was not open to collaboration on new features.
Flexibility would also be quantified when evaluated as part of a specific project (described in more detail in Appendix A).
“Our previous embedded banking provider was reluctant to collaborate to help us develop new features. Instead, we got the feeling that ClearBank’s primary objective is really to power other fintechs with their solution.”
Chief of staff, fintech
Quantified cost data as applied to the composite
Total Costs
| Ref. | Cost | Initial | Year 1 | Year 2 | Year 3 | Total | Present Value |
|---|---|---|---|---|---|---|---|
| Dtr | Implementation costs | £582,120 | £0 | £0 | £0 | £582,120 | £582,120 |
| Etr | ClearBank Embedded Banking platform costs | £0 | £1,088,640 | £1,569,708 | £2,123,730 | £4,782,078 | £3,882,542 |
| Ftr | Additional operational costs | £0 | £288,750 | £357,000 | £441,000 | £1,086,750 | £888,871 |
| Total costs (risk-adjusted) | £582,120 | £1,377,390 | £1,926,708 | £2,564,730 | £6,450,948 | £5,353,533 | |
Implementation Costs
Evidence and data. The implementation of Embedded Banking is a collaboration between the customer and ClearBank. Interviewees noted that they involved stakeholders from multiple teams such as customer service, risk and compliance, legal, senior management, product, and technology. They reported involving about 10 FTEs for a period of up to 12 months, but some of them highlighted that the implementation took longer than expected due to circumstances not attributed to ClearBank.
- One interviewee’s organisation had a previous embedded banking partner prior to working with ClearBank. This resulted in extra effort and time as they needed to inform all account holders about ClearBank, explain all the changes in detail, update account details, share terms of agreement, and answer questions.
Modelling and assumptions. Forrester assumes the following for the composite organisation:
- A team of 10 FTEs are allocated to the implementation.
- The average fully loaded hourly rate for these FTEs is £35.
- The implementation project takes nine months (1,584 hours) to complete.
- Each month contains 176 working hours.
Risks. The cost of the implementation may vary, depending on the following factors:
- The complexity of the organisation’s IT environment.
- The complexity of the embedded banking relationship and the extent to which the organisation meets the criteria ClearBank set (e.g., legal, compliance).
- The number of FTEs involved to on-board the embedded banking solution and oversee the ongoing outsourced arrangement between the client and ClearBank.
- The average fully loaded hourly rate for these FTEs.
Results. To account for these risks, Forrester adjusted this cost upward by 5%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of £582,120.
Implementation Costs
| Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|---|
| D1 | Time required to implement Embedded Banking (hours) | Interviews | 1,584 | 0 | 0 | 0 | |
| D2 | Full-time FTEs involved in the implementation process | Interviews | 10 | 0 | 0 | 0 | |
| D3 | Average hourly fully loaded compensation for each FTE | TEI standard | £35 | £0 | £0 | £0 | |
| Dt | Implementation costs | D1*D2*D3 | £554,400 | £0 | £0 | £0 | |
| Risk adjustment | ↑5% | ||||||
| Dtr | Implementation costs (risk-adjusted) | £582,120 | £0 | £0 | £0 | ||
| Three-year total: £582,120 | Three-year present value: £582,120 | ||||||
ClearBank Embedded Banking Platform Costs
Evidence and data. Organisations using ClearBank Embedded Banking platform incurred fees on an annual basis. Fees were driven by the number of accounts onboarded and the volume of inbound and outbound payment transactions. Fees include access to ClearBank’s core functionality, maintenance on accounts powered by ClearBank, and costs of payment transactions. Platform fees constitute the biggest component of total costs. ClearBank offers volume-based discounts, so the unit rate would be lower for an organisation onboarding a higher volume of accounts and processing a greater volume of payment transactions.
Modelling and assumptions. For the composite organisation, ClearBank Embedded Banking fees amount to £1.08 million in Year 1. As the composite scales, the number of accounts powered by ClearBank and the number of payment transaction fees increase to £1.5 million in Year 2, and further to £2.1 million in Year 3.
Risks. ClearBank Embedded Banking platform fees may vary, depending on the following factors:
- Number of accounts onboarded.
- Number of inbound and outbound payment transactions.
- Discounts agreed with ClearBank.
Results. To account for these risks, Forrester adjusted this cost upward by 5%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of £3.9 million.
ClearBank Embedded Banking Platform Costs
| Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|---|
| E1 | ClearBank Embedded Banking annual fees | Interviews | £1,036,800 | £1,494,960 | £2,022,600 | ||
| Et | ClearBank Embedded Banking Platform costs | E1 | £1,036,800 | £1,494,960 | £2,022,600 | ||
| Risk adjustment | ↑5% | ||||||
| Etr | ClearBank Embedded Banking Platform costs (risk-adjusted) | £0 | £1,088,640 | £1,569,708 | £2,123,730 | ||
| Three-year total: £4,782,078 | Three-year present value: £3,882,542 | ||||||
Additional Operational Costs
Evidence and data. Customers are responsible for managing some processes associated with ClearBank Embedded Banking (e.g., customer onboarding and account creation, transaction monitoring, and complaint processing). Organisations that already have the technology in place and the FTEs needed to take ownership of these processes won’t incur any significant additional operational costs.
- Two of the organisations whose representatives Forrester interviewed reported additional costs related to these processes. The chief of staff at a fintech organisation told us they spent roughly £100,000 on a risk management tool that is essential for the KYC process and anti-money-laundering (AML) checks. The chief product officer at another fintech organisation noted that they spent nearly £75,000 on additional tools and around £200,000 for the additional FTEs they hired.
Modelling and assumptions. Forrester assumes the following for the composite organisation:
- Additional operational costs amount to £75,000 in Year 1. As the number of accounts increases each year, these costs grow to £140,000 in Year 2 and further to 220,000 in Year 3.
- The compensation for the additional FTEs hired to manage the outsourced processes amounts to £200,000 per year.
Risks. The additional operational costs may vary, depending on the following factors:
- Tools and FTEs already available at the organisations.
- Costs of the tools selected.
- Compensation for FTEs hired.
Results. To account for these risks, Forrester adjusted this cost upward by 5%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of £889,000.
Additional Operational Costs
| Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|---|
| F1 | Additional tools needed to manage outsourced processes | Interviews | £75,000 | £140,000 | £220,000 | ||
| F2 | Compensation for additional FTEs needed to manage the Embedded Banking platform | Interviews | £200,000 | £200,000 | £200,000 | ||
| Ft | Additional operational costs | F1+F2 | £275,000 | £340,000 | £420,000 | ||
| Risk adjustment | ↑5% | ||||||
| Ftr | Additional operational costs (risk-adjusted) | £0 | £288,750 | £357,000 | £441,000 | ||
| Three-year total: £1,086,750 | Three-year present value: £888,871 | ||||||
Consolidated Three-Year Risk-Adjusted Metrics
Cash Flow Chart (Risk-Adjusted)
Total costs Total benefits Cumulative net benefits-
The financial results calculated in the Benefits and Costs sections can be used to determine the ROI, NPV, and payback period for the composite organisation’s investment. Forrester assumes a yearly discount rate of 10% for this analysis.
These risk-adjusted ROI, NPV, and payback period values are determined by applying risk-adjustment factors to the unadjusted results in each Benefit and Cost section.
Cash Flow Analysis (Risk-Adjusted Estimates)
| Initial | Year 1 | Year 2 | Year 3 | Total | Present Value | |
|---|---|---|---|---|---|---|
| Total costs | (£582,120) | (£1,377,390) | (£1,926,708) | (£2,564,730) | (£6,450,948) | (£5,353,533) |
| Total benefits | £0 | £2,096,388 | £4,189,860 | £6,358,176 | £12,644,424 | £10,145,493 |
| Net benefits | (£582,120) | £718,998 | £2,263,152 | £3,793,446 | £6,193,476 | £4,791,960 |
| ROI | 90% | |||||
| Payback | 10 months | |||||
Appendix A: Total Economic Impact
Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s technology decision-making processes and assists vendors in communicating the value proposition of their products and services to clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior management and other key business stakeholders.
Total Economic Impact Approach
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Benefits represent the value delivered to the business by the product. The TEI methodology places equal weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of the technology on the entire organisation.
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Costs consider all expenses necessary to deliver the proposed value, or benefits, of the product. The cost category within TEI captures incremental costs over the existing environment for ongoing costs associated with the solution.
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Flexibility represents the strategic value that can be obtained for some future additional investment building on top of the initial investment already made. Having the ability to capture that benefit has a PV that can be estimated.
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Risks measure the uncertainty of benefit and cost estimates given: 1) the likelihood that estimates will meet original projections and 2) the likelihood that estimates will be tracked over time. TEI risk factors are based on “triangular distribution.”
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PRESENT VALUE (PV)
The present or current value of (discounted) cost and benefit estimates given at an interest rate (the discount rate). The PV of costs and benefits feed into the total NPV of cash flows.
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NET PRESENT VALUE (NPV)
The present or current value of (discounted) future net cash flows given an interest rate (the discount rate). A positive project NPV normally indicates that the investment should be made unless other projects have higher NPVs.
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RETURN ON INVESTMENT (ROI)
A project’s expected return in percentage terms. ROI is calculated by dividing net benefits (benefits less costs) by costs.
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DISCOUNT RATE
The interest rate used in cash flow analysis to take into account the time value of money. Organisations typically use discount rates between 8% and 16%.
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PAYBACK PERIOD
The breakeven point for an investment. This is the point in time at which net benefits (benefits minus costs) equal initial investment or cost.
The initial investment column contains costs incurred at “time 0” or at the beginning of Year 1 that are not discounted. All other cash flows are discounted using the discount rate at the end of the year. PV calculations are calculated for each total cost and benefit estimate. NPV calculations in the summary tables are the sum of the initial investment and the discounted cash flows in each year. Sums and present value calculations of the Total Benefits, Total Costs, and Cash Flow tables may not exactly add up, as some rounding may occur.
Appendix A: Endnotes
1 Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s technology decision-making processes and assists vendors in communicating the value proposition of their products and services to clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior management and other key business stakeholders.
2 The UK Financial Services Compensation Scheme (FSCS) can provide compensation if an eligible deposit is unavailable because a bank is unable to meet its financial obligations. Compensation is limited to a maximum of £85,000 per person and per bank. ClearBank offers services through a number of intermediaries and for the purposes of compensation from the FSCS, if a customer holds deposits with ClearBank or through one or more of these intermediaries, these will likely be aggregated up to a maximum of £85,000.
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