Atom’s explosive growth rocks the banking establishment

Frus­tra­tion is some­thing busi­ness­es try very hard to avoid among their cus­tomers, but when entre­pre­neurs feel it strong­ly, it can lead to some­thing rather spe­cial. Look no fur­ther than the cur­rent neobank­ing crowd, a group of pre­dom­i­nant­ly ex-bankers who shared the frus­tra­tion that con­sumers were feel­ing with the incum­bent finan­cial giants, and saw the oppor­tu­ni­ty to vast­ly improve their expe­ri­ence, pow­ered by tech­nol­o­gy. 

Not all neobanks are cut from the same cloth, how­ev­er. The likes of Mon­zo, for instance, imme­di­ate­ly led with fill­ing the expe­ri­ence gap in trans­ac­tion­al bank­ing and cur­rent accounts, prod­ucts which are free, with hopes to mon­e­tise down the line. Atom Bank, launched as the UK’s first app-only bank by founders includ­ing ex-First Direct CEO Mark Mullen and Metro Bank co-founder Antho­ny Thom­son, saw a more sus­tain­able route. 

“While cur­rent accounts are a fun­da­men­tal part of the bank­ing set, even if you attract a huge cus­tomer base, offer­ing the best expe­ri­ence, it’s a real strug­gle to mon­e­tise,” says Edward Twid­dy, chief cus­tomer offi­cer at Atom Bank. “Like oth­er neobanks, we knew the bank­ing set-up wasn’t good up and were deter­mined to com­bine great cus­tomer expe­ri­ence with world-beat­ing effi­cien­cy and engage­ment. How­ev­er, our plan was to start with lend­ing and then grow a trans­ac­tion­al bank out of that sol­id income base.”

In 2014, Atom’s founders set about mak­ing lend­ing, a process sit­ting at the heart of the UK econ­o­my, more fric­tion­less for cus­tomers and effi­cient for the bal­ance sheet. To get a bank­ing license, a busi­ness must first prove itself as a deposit tak­er, with the sim­plest route, from a lender’s per­spec­tive, offer­ing fixed-term bonds. Along­side that, to get its bal­ance sheet work­ing, Atom start­ed with rel­a­tive­ly unau­to­mat­ed, sim­ple busi­ness lend­ing, before pro­gress­ing to a much more sophis­ti­cat­ed jour­ney into mort­gages, aim­ing to bring unprece­dent­ed automa­tion to prime, and lat­er near-prime, lend­ing.

Atom invest­ed heav­i­ly in mort­gage automa­tion on the orig­i­na­tion side, includ­ing the jour­neys involv­ing val­u­a­tion, income ver­i­fi­ca­tion, deci­sion­ing and the rela­tion­ship with con­veyanc­ing and legal pan­els. The result is major dis­rup­tion of a tra­di­tion­al­ly very clunky, frus­trat­ing process for cus­tomers, who can now clear­ly see every stage of what’s hap­pen­ing in a much more open way. Atom’s mort­gage engine can take a mort­gage appli­ca­tion and turn it into an auto­mat­i­cal­ly under­writ­ten deci­sion in as fast as 12 sec­onds. Since its launch, the bank has loaned £2.8 bil­lion to UK mort­gage cus­tomers.

“That’s opposed to weeks in oth­er banks, which has been a key dif­fer­en­tia­tor for us,” says Twid­dy. “We’ve done that through a com­bi­na­tion of tech­nol­o­gy and pol­i­cy, and the for­mer has dri­ven the lat­ter. We have a high­er reject rate than oth­er banks, but once you have been accept­ed you go all the way through very quick­ly and seam­less­ly. When a mort­gage advi­sor is sat next to a cus­tomer, they can say, well let’s find out if Atom Bank will lend to you, and it is a near real-time deci­sion. That trans­forms peo­ple’s atti­tudes.”

Once estab­lished as a lender, Atom could turn its atten­tion to launch­ing a con­sum­ing-fac­ing trans­ac­tion­al bank­ing brand. Its rapid growth means its three-year CAGR growth, 838.02 per cent, is near­ly twice that of the sec­ond-placed com­pa­ny in D&B’s Accel­er­ate 50. The mobile bank, which employs 420 peo­ple based out of Durham in the North East of Eng­land, is eye­ing prof­itabil­i­ty for its mort­gage and busi­ness lend­ing with­in a year. 

It hasn’t been a com­plete­ly straight­for­ward jour­ney, how­ev­er, with agili­ty cru­cial to its suc­cess in an extreme­ly fast-mov­ing tech­nol­o­gy land­scape where the dis­rup­tors can very soon become the dis­rupt­ed. Atom launched six months too ear­ly, Twid­dy believes, because it received its per­mis­sion to go live six months before the FCA, which had only then start­ed to explore cloud-native inno­va­tion at the core of bank­ing, issued any guid­ance. Though Atom launched with good 2000s tech­nol­o­gy, six months lat­er when the FCA out­lined its atti­tude to cloud, it was effec­tive­ly sit­ting on lega­cy infra­struc­ture. 

This meant that in the midst of Atom’s growth, and while it went about trans­form­ing its bal­ance sheet and income char­ac­ter­is­tics and grow­ing its cus­tomer expe­ri­ence, it also had to swap out its under­pin­ning tech­nol­o­gy, host­ing and oth­er sup­pli­ers in mid-flight.

“We’ve swapped out vir­tu­al­ly every­thing in our tech­nol­o­gy stack in the last five years, and par­tic­u­lar­ly the last two and a half years, as we’ve adopt­ed Thought Machine as the cen­tre of our bank­ing stack,” says Twid­dy. “There are five or six busi­ness­es that are adopt­ing cloud-native Thought Machine tech­nol­o­gy to run their busi­ness­es, includ­ing Stan­dard Char­tered in Sin­ga­pore and Hong Kong, SEB, a Scan­di­na­vian bank just about to put a bank into beta on it, and Lloyds Bank­ing Group in the UK which have just start­ed. 

“Atom is forg­ing the way with this tech­nol­o­gy. If you are going to the cloud, you’ve got to go prop­er­ly cloud native, with a real-time data archi­tec­ture that enables you to be per­fect­ly inte­grat­ed between what’s hap­pen­ing in the cus­tomer’s world, what’s hap­pen­ing in the bank’s world and how your plat­form responds to it. It has been a mas­sive tech trans­for­ma­tion for us and we are still only sev­en years old as a busi­ness.”

Data is the inte­gral com­po­nent of all of this. As an entire­ly dig­i­tal bank which has nev­er met a sin­gle cus­tomer, Atom relies on the pow­er of data to keep on top of cus­tomer expec­ta­tions. This has required incred­i­bly savvy automa­tion of tra­di­tion­al­ly time-inten­sive onboard­ing process­es, such as fraud and know your cus­tomer (KYC) checks.

“Our entire busi­ness is data,” Twid­dy adds. “There is a strange rela­tion­ship between a bank and a new cus­tomer. They know who they are, where their mon­ey’s come from, but the bank doesn’t. Through automa­tion, Atom has trans­formed that onboard­ing expe­ri­ence so that, with­in just a few min­utes, a new cus­tomer can access their account and then move mon­ey in an instant. Every­thing that needs to be ver­i­fied hap­pens in real-time while tak­ing the cus­tomer through the steps. It’s all built on data, and it’s the same with the mort­gage jour­ney. We’ve built a real-time data archi­tec­ture around the bank enabling us to abstract at any one moment and con­stant­ly refine our approach.”

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