Anthony Thomson

Atom bank wants to change the face of banking. Founder and chairman Anthony Thomson explains to Peter Jackson how the challenger business is going about it.

Atom bank is young but it has already established a reputation for springing surprises on a startled financial world. It first raised eyebrows when it was founded in 2014, a new challenger bank when banking’s reputation was still reeling from the crash. It headquartered itself in Durham, rather than the City of London, and it introduced a new app-based banking model that is proving strikingly popular.

Few would have expected that in just three years it would have grown to the point where it had 300 staff, just shy of 19,000 savings customers and a balance sheet of more than £570m.

Then in April, underlining that it’s far from having exhausted its capacity to surprise, Atom announced that it had signed up the Black Eyed Peas founder/ rapper as its first strategic board advisor.

It was only a few days after this that I met Anthony Thomson, the bank’s founder and chairman, in Durham’s Flat White Kitchen, a stylish eatery popular with the young and forward thinking – very much in the Atom image.

Thomson, an engaging man, relaxed and informal in dress and manner, explains the appointment. “I’m a marketer by background and I was sitting at home one evening thinking, were Atom a person, what would be its characteristics – an old marketing exercise. It needs to be somebody who is highly digitally literate and has a real grasp of technology, someone who understands the power and role of social media and how it’s changing how people work, somebody with a real understanding of the popular culture and the zeitgeist.

“Then popped into my head and the more I thought about him and the more I researched him I learnt – what I hadn’t realised – that while he’s been an incredibly successful musician he’s also very active in technology, with his own technology company, employs roughly 150 people around the world in artificial intelligence, and he’s a regular speaker at the World Economic Forum in Davos. So, he’s an incredibly well-connected individual, connected both to technology but also to millennial consumers. When we met, he really got what we were trying to do and was very keen to be part of it.’’

The star’s technological knowledge and his understanding of Atom’s target markets will help inform the bank’s strategy.
Thomson adds: “I think he will be particularly helpful in business banking because, above all, he’s an incredibly successful entrepreneur and I think people in business will relate to that.”

Atom bank’s identity is about more than new technology and youth appeal. It is a bank that was born in the wake of the banking crisis and that was conceived as a reaction to the philosophy and ethos that had been prevalent in the banking sector for decades before the Lehman Brothers collapse. It is a bank that declares different and distinct values.”

Thomson recalls how these underlay the foundations of Atom. “I had the idea for what became Atom in 2012 when I wanted to create a new bank but there are certain things that are very important to me as an individual. First and foremost, I believe that one of the great malaises in UK PLC in general and banks in particular is that they think they exist to make money, whereas I believe absolutely that profit is a by-product of giving the customer a better product, service or experience.’’

With this conviction, he pulled together the original team of Founders: including Mark Mullen, the chief executive; Dave McCarthy, chief financial officer; Edward Twiddy, chief innovations officer; Craig Iley, managing director of business banking; Sophie Haagensen, head of strategy and planning and Paul Hanks, Atom’s first Chief Technology Officer.

“We spent our first few months just talking about what mattered to us, and it was about creating a customer-centric organisation that would do those things.’’

Clearly the new bank had also to make money – to reward its shareholders, to generate the capital to grow the business and to survive.

“But, it needed to be that way round,’’ he adds. “So, we spent a lot of time talking about values before we started to talk about what the business itself would look like. I wanted to work with people I liked, I wanted to work with people who shared the same belief, with people who were very open and very honest, I didn’t want it to be an organisation of politics and I’m really pleased to say, here we are three years in and it does feel like a values-driven organisation.

“This morning I was addressing a bunch of my colleagues who’ve just joined the bank about what was important to them and why the values and business were important and I said to them, as I say to everybody who joins Atom, ‘If you don’t buy into our values, then you shouldn’t be here, it’s not good for you, it’s not good for us’.’’

This should come as a breath of fresh air to an industry that, in recent years, has had – to put it mildly – an image problem. Whenever I’m asked, I say, I’m not a banker, but I don’t know how long I can keep saying that, having been involved for 10 years,’’ jokes Thomson. “But it comes back to this original point, this belief that profit is a by-product of doing something well for your customer. I think we can change banking for good, that is to say, we can change it permanently, for the better.’’

The North East’s last great bank, Northern Rock, collapsed and left a bitter taste for many, but it also left a pool of talented and experienced people that Atom could draw upon. In attracting staff, Thomson, a proud North Easterner, believes that Atom’s location in the region is also an advantage.

He explains: “A lot of people want to move out of London and it’s an area that’s very attractive in terms of education, in terms of quality of life and in terms of what you can get for your money.’’

He also points to the region’s burgeoning technology sector, driven and encouraged by the universities and including a thriving gaming sector. Last year Atom acquired IT business Grasp, headed by North East games pioneer Brian Jobling, who joined Atom as business development director as part of the deal. Thompson adds: “The region has a fantastic reputation in terms of innovation. If you look at the innovations and inventions that have come out of the North East – from the Davy Lamp, through to the steam train, the turbine engine, the windscreen wiper, Lucozade – the area has a fantastic history of innovation and that comes from the entrepreneurial nature of people here and the support that the community has given to businesses that have been built here.’’

It is also the case that by not basing itself in London with the associated high cost base, Atom is better able to offer competitive deals to its customers. “Because we are a very low-cost operation, both from the advantages that come from being based in the North East, plus the advantages of being a technology-led business, it means we are very efficient and that efficiency is reflected in a couple of major areas – we can give better savings rates and we can give better loan rates, whether that’s business lending or mortgages,’’ says Thomson.

This has allowed Atom to grow its depositor base and its lending base without resorting to wholesale funding. “Usually for a bank it’s very hard to be attractive on both sides of the balance sheet because in essence it’s depressing your margin, but because we have such an efficient business we can square that particular circle and give good rates to savers and good rates to borrowers.’’

The bank has also been successful in raising capital, having received a total of £219m since incorporation with further raises planned.

Currently Atom offers three primary product lines: a savings account, residential mortgages and business loans. In the UK 70% of mortgages are bought through an intermediary, which is how Atom bank’s mortgages are distributed through the Digital Mortgages brand.

Industry experts say there is room for new players in the mortgage market, as long as they target a niche. What is Atom bank’s niche? “People who want to do their mortgage incredibly efficiently, at low cost, through an app,’’ he says. “It comes back to this – can we give our customers a better product, service or experience? Well, customers love the experience of banking with Atom with customers scoring it incredibly highly through tools like Reevoo, with 9.1 out of 10 consistently.’’

In fact, one of Atom bank’s recent deals, which charged just 1.29% fixed for five years – at the time, the UK’s cheapest-ever 5 year fixed rate mortgage deal – was so popular it was pulled after just nine days. Thomson says: “It was the amount of demand we had for it. We can only lend the money that we’ve taken in in deposits and also we have to ensure we have a balanced mix of products in our portfolio.’’

And current accounts? “They are on the road map. The whole market, in terms of technology and personal financial management products, the introduction of APIs (application program interfaces) is changing, so we are studying that very closely. We have the advantage of being a very agile business, so, as it becomes clearer where the market is going, we will be able to meet those needs.’’

In business banking, Atom bank, again using the Digital Mortgages brand, is willing to secure loans against assets other than bricks and mortar, such as an occupational lease or plant and equipment. While it is a highly-automated bank, it still places great emphasis on old-fashioned manual underwriting to properly serve the wide variety of small business borrowers.

However, the process is still extremely streamlined. The borrower is not required to go through a series of meetings with the bank, meeting demands for more and more financial reports then waiting for the application to jump the various hurdles of the bank’s bureaucracy only to be asked for more information, a process that could take six weeks.

Atom bank aims to give a lending decision within 72 hours of receipt of a completed application form. It does this using its UK-wide network of intermediaries, made up of small businesses’ trusted advisors such as financial advisors, brokers and accountants and Atom’s “Digital Bridge”, which provides a ‘door’ that the customer opens to send information digitally. The door then closes, meaning that the customer has full control of what they send. The information can then be fed directly into the underwriter’s analysis tools. To date, Atom bank has approved £118m of business loans.

“Small businesses are the backbone of the UK economy and we are really proud to be doing our bit to support them,’’ says Thomson. “Our customers come from a wide geographical base, which we need because we have to avoid geographical concentration risk and we have to sector concentration risk, so it’s a fairly wide mix of business.’’

He says that the use of intermediaries allowed the bank to gain a nationwide footprint at an early stage but that “at some point” it will be going directly to businesses.

These are Atom’s three initial product areas but – apart from current accounts – it has more offers in development.

“Our intention is to have a complete range of products for business and consumers and a broader range of savings and lending products,’’ says Thomson.

He then indicates that Atom bank will have some more rabbits to pull out of the hat. “We have a road map for these. I don’t want to say exactly where we are right now, we’d like some of these to come as a pleasant surprise to our customers and perhaps not such a pleasant surprise to our competitors.’’

We meet on a day that ransomware has paralysed much of the NHS and attacked various organisations across Europe, which has to prompt the question of cybersecurity. “It is an issue, but the reality is, it’s an issue for everybody who uses a computer,’’ he says. “In the so called traditional banks with branches, everything that’s done is done on computers; when you log onto internet banking, it’s all done on computers, so it’s a challenge for everybody in financial services.

“I think we are as well placed as anybody to deal with that threat because Atom is delivered through an app. All of the challenges that have arisen to date have been internet based and we are not internet based, we’re app based, which is an important distinction. But that’s not to say we are complacent, it is a real and present danger to all businesses.’’

Atom uses biometric identification, such as facial and voice recognition. In this, as in other areas, technology is central to Atom bank and Thomson insists the bank will continue to innovate and data, data analytics and artificial intelligence will be the key drivers of the business.

Atom bank is positioning itself for tomorrow’s banking and Thomson is clearly a man with an eye on the future. He says: “For me Atom is a bit like building a monument, something that will outlive me and, while I had an original idea, there are a lot of people building it and every person who joins the business helps improve Atom. I’m very proud to have been part of it.

“I’d like to think, when I’m gone, my kids and – if I’m lucky enough to have them – my grandchildren, will look at it with pride and say, my dad or my grandad was part of building that.’’

Atom ant

Anthony Thomson grew up in Heaton in Newcastle and his first job was working for the city’s Evening Chronicle newspaper, which first gave him an interest in advertising and marketing. He moved to London in 1983 where he started a marketing services company, City Financial Marketing, which specialised in financial services and over an 11-year period grew to be the largest financial services marketing agency of its kind in Europe.

He sold the business in 1998 and then co-founded the Financial Services Forum, a membership organisation for senior executives, which he ran until 2007 when he became chairman.

In 2010 he founded Metro Bank, the first high street bank to be granted a licence in the UK for 150 years. He chaired Metro for three years before leaving in 2012, when he stepped down to begin work on what became Atom bank.

He is a non-executive director of Agiliti, a software as a service company. He is Goldman visiting professor of innovation and enterprise at Newcastle University Business School and he is the chairman of the National Skills Academy for Financial Services, a nationwide employer-led charity that helps create employment opportunities and apprenticeships in financial services.

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