The neobank revolutionising business lending

It’s long been clear that the tra­di­tion­al mod­el of retail bank­ing is bro­ken but, as the rapid rise of neobanks shows, mil­lions of con­sumers now want change.

These dig­i­tal-first busi­ness­es have low­er over­heads than tra­di­tion­al banks as they do not have to splash out as much on prop­er­ty or peo­ple.

But there’s a fur­ther step that some of them are mak­ing, to jet­ti­son unprof­itable ser­vices and focus on deliv­er­ing a small­er range of ser­vices more effec­tive­ly and prof­itably for cus­tomers and them­selves with­out cut­ting cor­ners.

Alone among the recent wave of new entrant banks, Atom is focused on mak­ing the chunki­est house­hold and SME lend­ing deci­sions as easy as pos­si­ble. It has an envi­able rep­u­ta­tion as a dig­i­tal mort­gage lender, hav­ing helped UK home­own­ers with over £3bn of mort­gage sales since 2017. And now it is on track to have £1bn of busi­ness lend­ing on its bal­ance sheet by the end of the year.

But the secret to its suc­cess is as much in what it isn’t doing as what it has done. Atom is not a cur­rent account bank, and accord­ing to Edward Twid­dy – its chief cus­tomer offi­cer and co-founder – that is what makes it able to beat off the com­pe­ti­tion from both high street lenders and rival neobanks.

Giv­ing more, tak­ing less
The rea­son is that all of us – well, near­ly all of us – pay noth­ing when we go to the cash­point, buy our shop­ping on a deb­it card, or set up direct deb­its or stand­ing orders. This is not the case for peo­ple who are not pay­ing off their cred­it cards every month, or in and out of unau­tho­rised over­drafts.

But in the UK the vast major­i­ty of peo­ple get cur­rent accounts for free, despite them being expen­sive to set up and run and much less valu­able to the banks in terms of the free float of deposits that sit in them overnight and at the end of the month.

“There’s a polit­i­cal debate to be had about whether com­pe­ti­tion is well served by hav­ing a zero-priced prod­uct at the heart of bank­ing, but it will be a brave move to require the indus­try to start charg­ing every­one for their deb­it card,” says Twid­dy.

“In the mean­time, Atom’s insight is that by tak­ing the cost of cur­rent accounts away, it is freed up to offer bet­ter rates on sav­ings accounts, mort­gages or busi­ness loans, while invest­ing more in dig­i­tal inno­va­tion.”

With low­er costs and a sim­pler mod­el, Atom becomes a strange kind of busi­ness – giv­ing more to its cus­tomers and tak­ing less. It is cur­rent­ly offer­ing com­pet­i­tive rates in mort­gages lend­ing.

Shak­ing up busi­ness lend­ing
Com­bine great mort­gage rates with very com­pet­i­tive sav­ings rates – Atom offers 0.85% on a 2 Year Fixed Saver – and the advan­tages for per­son­al cus­tomers are clear. But while con­sumers are increas­ing­ly aware of the ben­e­fits offered by neobanks and are mov­ing away from the idea of being banked with a sin­gle busi­ness in order to find the best deal, Twid­dy says that too many UK small busi­ness­es still miss out on the best oppor­tu­ni­ties.

“Mr Main­war­ing is no longer the gate­keep­er to any of us get­ting a mort­gage, and every­one can get inde­pen­dent advice from a mort­gage bro­ker these days. This democ­ra­ti­sa­tion of deci­sion-mak­ing and re-bal­anc­ing of pow­er between banks and con­sumers has some way to go yet, but it is at least fur­ther ahead in per­son­al bank­ing than in busi­ness bank­ing.”

Atom’s own com­mer­cial lend­ing is, like its mort­gages, only sold through net­works of inde­pen­dent bro­kers across the coun­try. That might seem like an odd choice for a direct dig­i­tal lender, but Twid­dy explains: “While we might, at some point in the future, sell our mort­gages and com­mer­cial loans direct to cus­tomers, we are very hap­py to go toe-to-toe with the biggest lenders in the coun­try and to sell our loans through bro­kers who are not com­mit­ted to sell an Atom loan and instead are there to inform and pro­tect the cus­tomer.”

Atom lends SMEs up to £5m a time with a typ­i­cal loan size of around £800,000. It also guar­an­tees trans­par­ent pric­ing, no load­ing of fees and no hag­gling – all areas in which tra­di­tion­al lenders score poor­ly.

It is per­haps not sur­pris­ing that the neobank recent­ly achieved a net pro­mot­er score of +88 in a recent sur­vey of its busi­ness bank­ing cus­tomers, high­light­ing cus­tomers’ will­ing­ness to rec­om­mend it to oth­ers. UK high street banks typ­i­cal­ly score in the teens in such polls.

Pos­i­tive and proac­tive
Atom also has a strong rep­u­ta­tion for help­ing and sup­port­ing its cus­tomers with any ques­tions or through bad times. Dur­ing the pan­dem­ic, its pos­i­tive and proac­tive approach came into its own for those cus­tomers who need­ed help with repay­ments, whether they were busi­ness­es or mort­gage hold­ers. Atom was also approved to offer gov­ern­ment-backed loans via the Coro­n­avirus Busi­ness Inter­rup­tion Loan Scheme and is now part of its suc­ces­sor, the Recov­ery Loan Scheme.

In addi­tion, Atom recent­ly announced a part­ner­ship with spe­cial­ist busi­ness lender Fund­ing Cir­cle which will see anoth­er £350m of loans offered to UK SMEs this year. The aim is to make it sim­pler for SMEs to access finance, with appli­ca­tions tak­ing an aver­age of six min­utes and lend­ing deci­sions just nine sec­onds thanks to the use of advanced machine learn­ing capa­bil­i­ties.

Atom has cut its teeth dur­ing one of the most tur­bu­lent peri­ods ever in the UK. Com­ing out of that on the cusp of break­ing even and with a resilient and con­tem­po­rary tech­nol­o­gy stack now firm­ly in place, Twid­dy believes the busi­ness is very well placed to play its role.
“At the heart of bank­ing there’s a sol­id truth that savers and bor­row­ers both need a good deal and any­thing that gets in the way is a drag on them and on the econ­o­my. As oth­er fin­techs and pay­ments spe­cial­ists come to mar­ket and cre­ate more ways to man­age the day-to-day buy­ing of goods and ser­vices, we’ll be here to make sure that the peo­ple who want to own their own homes and grow their busi­ness­es can find a bank for them.”

For more infor­ma­tion please vis­it atombank.co.uk

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