I’ve recently been interviewing a series of innovators and challengers in the banking system, and will publish an interview here on a regular basis with these visionaries.
In the first of The Finanser Interviews we talk to Mark Mullen, CEO and Co-Founder of Atom Bank and former CEO of First Direct. Atom Bank is a major new digital bank due to launch in the UK later this year.
How did Atom Bank come about and how do you see the vision for the launch of the bank?
It is fair to say that Atom Bank is Anthony Thomson’s brain child, in the sense that Anthony wanted to launch a new bank after leaving Metro Bank. He began having serious conversations with me in March 2013, and we started to discuss what sort of bank could we create. It was not just about whether there was a space for a new competitor in the industry but what sort of bank would we develop.
We very quickly agreed that a ‘digital first’ bank was a model worth building, considering all the changes we had seen in the industry, so we started to work more closely together around this vision. Anthony then went and found additional expertise and team members, so then we knew we had plenty of opportunity to change the market and increase competition, as it’s been a slow pace of change so far. In fact, it is strange to see such slow change when you have these incredible stresses and drivers for change, both technologically and behaviorally. The lack of change in the face of clear demand and opportunity now creates the focal points for the team as we move towards the launch of Atom Bank.
I recognise that you are looking to launch a radically different digital bank, but what exactly is ‘a radically different digital bank’?
I think it’s important to look at the entire business model.
Existing big banks can go and spend millions of dollars on building out their digital platform – and they will. But when it comes to being radically different they simply cannot. To be radical you need to have a blank sheet of paper and build something from scratch. Then, every decision you make can be aligned to your vision, and can be aligned to the competitive advantages that you’re trying to create. Whereas if you are in a big established bank, every decision you make is compromised by the need for it to connect to whatever is already on the table, by way of legacy or by way of existing customer or by way of existing products and services.
So, at a very simple level, we can be radically different because we don’t have to create a single product we don’t believe in. An existing bank has to make sure all existing products can be distributed by all channels, whether they are new or not. That is a fundamental difference between ‘radical new’ as opposed to evolutionary or even revolutionary.
A radical approach to how we use this one-off opportunity to be new allows us to challenge and examine every single decision, every aspect of our supply chain and our business model. It allows us to potentially focus on a different set of customers. We don’t have to be for everyone. It allows us to narrow the range of things to focus upon. In particular, it means that we are not trying to live up to a reputation of a past, as we don’t have one.
There are a few radical digital banks out there, like Simple and Moven. How do you see your vision playing out against those guys, for example?
Well I have tremendous interest and admiration for them, but these are front ends to banking, rather than banks. We had a discussion about whether it was necessary for us to build both the back end and the front end and, on balance, we decided to build the complete service from product through customer service and delivery. We would own the entire supply chain. That’s a much bigger ask, as we need to be an authorized financial institution, and it’s not just a technological play.
We believe we need to do this, as we are not then hostage to the agenda of the owners of the balance sheet or a service provider. We are not attached to something which has its own reputation and its own legacy issues. But clearly the downside is that you have a lot of work to do, and it becomes a lot more complex to build the entire enterprise. Having said that, there is plenty of room for different models.
What’s really interesting about a Simple or Moven, and something I really believe in, is that they’re not just technology players. Rather, they are new brands. It’s very difficult for a long established brand to get its customers to reconsider who it is and what it stands for. Whereas if you launch a new brand, you get that opportunity to establish a set of credentials from scratch.
I’m really quite surprised in many respects that a lot of bigger players in the UK have not looked at this potential avenue for growth. I suppose given the context of the banking crisis, it may be understandable. Even so, these new firms are interesting for me as not just technology players, but also because of their brand play. Equally, these firms are different from Atom. They are not building the entire bank. They are building a piece of it, or a layer. We are not doing that. We are building the whole thing.
On the other side, I discovered recently there are other digital starts ups in the UK such as ‘Starling Bank’ (see interview with Starling CEO Anne Boden on February 25th). Do you see yourself as a player running alongside a bank like that, or do you see that your vision is different?
I don’t know to be absolutely honest. I don’t know what the vision of Starling Bank is. I think it was called ‘Bank Possible’ until fairly recently. I think Starling is a relatively new announcement and, as always the case in this sector, you hear rumours about what someone is doing or might be doing and they may or may not be true. Therefore, to be absolutely frank, I don’t know what the scope of Starling Bank is or their vision.
In any case, we run our own race and we have a pretty clear idea of what we stand for, who we are for and what we are building and that’s our all-consuming task. We aren’t worrying about what other people are doing yet. We haven’t got the head space for it. I also think there is plenty of opportunity for new players in the industry. I genuinely believe that. I think the base case assumption that a bank has to be big is no longer as true as it was, and potentially it’s quite unattractive for customers, and may be even unattractive for regulators and tax payers as it comes with a lot of downside.
I know from our previous conversations that your vision is different. For example, you aren’t going to have a typical bank call centre. You do have one, but it’s just there for technical issues rather than financial questions. Is that correct?
Yes. If we haven’t delivered a digital app that can help you with answers to not just basic questions but pretty sophisticated questions, then why did we bother building a digital bank? I absolutely believe in digital, and not just as an alternative channel. I’ve always believed in at as a fundamentally superior way of delivering banking services. The data doesn’t lie. The UK’s most satisfied customers in the banking sector are customers who use digital channels to consume banking services. That’s not a recent phenomenon, as you can trace this back 15 years or more.
The irony of it is that the less you see and speak to your customers, the more satisfied they are with you. I know this is a paradox but they feel better informed and more in control of their money as they are the ones making the decisions. I don’t think it’s an accident that some of the oldest digital platforms are in the investment markets for example. These platforms have proven to have longevity, when other aspects of the personal selling environment have declined in popularity and indeed represent higher risks to the distributors.
So, in that context, if you are building that sort of model, you still want to provide a support service for people, and you want to make that available and convenient. However, the primary role of that support service is to help answer technical questions. It is to answer the ‘how do I do this’ questions, as opposed to performing the transaction for the customer. I think our customers are more than capable of doing the latter themselves but, if there is a problem with the app, we will be on hand to help.
Will you be offering the typical banking services such as deposit accounts, credit cards, etc.?
We want to be a proper full service competitor for both personal and business banking. There are a lot of new entrants – and some not so new to the market that are essentially niche players. They are perfectly respectable and admirable enterprises. For us though, we want to go after the current account market and offer something new and fresh. So yes, we will certainly include what you might describe as the fundamental banking services and bank accounts.
Again, taking your experience with First Direct, you have got that knowledge of how to deal with customers remotely without branches. I am guessing you will still have the usual access to the ATM through the LINK network and all those sort of things?
We are looking at it and have a lot of dialogue with people on how our customers can get access to such services, and what they ‘expect’ as the orthodox banking channel. For example, as long as cash is still a big part of our society, we will offer debit cards and access to the ATM network. We are having a big debate over cheques though. We are not big fans of them, and we would rather not incur the cost of a solution that is many years out of date. There are some practicalities where you have to come towards customers’ needs however, and not compromise how they come to you. These are live and real debates at Atom right now.
One of the interesting moves you made is to base the Head Office in Durham. Is there a specific reason why you chose there?
There are a whole bunch of reasons, not the least of which is that Anthony is originally from Newcastle. I have worked in Leeds for many years, and I know it is possible to build and run a world-class business in the banking category outside London.
There is a lot to be said for being outside London, not least because it’s an expensive place to base a business. If you don’t need to be in London it doesn’t make sense to place a business where the ground rents and employment costs are so high, and where the markets are so massively competitive. Durham is appealing as the real estate is less expensive; but cheap land gets you nowhere when you’re building a high end company. So as importantly there are also fabulous universities; a huge population catchment area; and the city is well connected by trains to north and south. Equally, there is actually not that much in the way of alternative financial institutions, so we are offering an alternative employment proposition in the local market. That’s quite an attractive thing to do.
Bear in mind that we are also a digital bank and, as a consequence, there is no need for us to put the bank in an expensive place as ultimately the customer would have to pay for it. This is why it made no sense to our model to base ourselves in an expensive location, but in the one with the most talent availability and growth opportunities.
Looking at the years ahead, are there some milestones we should be looking out for?
When could we get the first Atom bank account opened? It’s difficult to give dates Chris, as I don’t want to commit to them. We are looking to launch in the second half of 2015. We very much want to launch the Atom brand and Atom bank account in the second half of 2015. We want to have completed the launch end-to-end within one year of opening our doors, so there is an awful lot to do. We don’t intend to open with all products and services from day one, and are more conscious about the need to get it right than the need to do it all. Our aim is to build our reputation on high quality, and we can be small and grow well through that approach. The alternative is to try to be big early and have problems, and so we know which way we would rather go. Overall the implementation will take about a year, but we certainly want to start that journey in the second half of 2015. Those are the plans.
I know one of the biggest challenges is getting the banking license, but equally you have an experienced team there and might be able to fast track that cycle as you have all done this before?
Yes, to an extent. One of the nice things about the process is that we’re doing our own work. We haven’t outsourced or contracted work to any consultancy. Our bank is designed by our team. We have written our own documents and applications to the regulators. We have taken in subject matter experts to help out in specific parts of it but, ultimately, it has been blueprinted and designed from the ground-up by us. A lot of this comes down to with whom you surround yourself with, and we’ve got some hugely talented people. It’s funny, as I was talking to the team during the briefing this morning and I kind of said ‘you’re not looking over your shoulders saying someone else did it’. Whatever happens at Atom will happen because we did it. Consequently if it’s good, we get to pat ourselves on the back. If it’s bad there’s no-one else to blame. I am confident we have got the right talent and I am sure I speak for everyone that works here when I say: how many opportunities will you get to build a bank from the blueprint plans on a clean sheet of paper through to reality?
It is also important to have the funding to make these things happen. What sort of people are involved in the backing of Atom Bank?
As you probably know we have Neil Woodford’s fund, Jon Boulton, and Jim O’Neill, the noted economist who coined the term BRICS and was previously with Goldman Sachs. Anthemis and Polar are also involved alongside our 20 or so original angel investors, so it is an interesting mix of city institutions, fairly big names and influential backers from the North East. It creates a clear link to the city and to where we are based. That has been very helpful in building the bank locally, as well as building the broader story of the bank in the City. It is also reassuring when people choose to back you. It is a vote of confidence. That adds momentum to a team especially when these investors are pretty shrewd, l renowned and respected investors.
If you are outlining the vision of what you would like to see at Atom Bank in five years from now, do you have an idea of what that will be?
I want it to be a major brand with a fabulous reputation. I don’t need it to be huge, just special, well respected, successful, reliable and sustainable. If I wanted anything it would to be recognised as a special brand doing something quite remarkable in its industry. If I had all my wishes it would be respected and recognised outside the banking industry too. Then it becomes a brand not just a bank. That’s what I really want.
Who will be the typical customer of the bank?
That used to be a relatively straightforward question to answer if you looked at any innovation adoption curve. You could pretty much say, if you were going to invest in new technology, you could go to the professional services sector such as teachers, accountants and so on. Or go to new students and graduates. If you look at the adoption across the age spectrum, you see that there are massive differences in every age demographic. What we have concluded therefore is that there is a mindset about digital adoption, and certainly a relationship between financial literacy and digital literacy. So, if you follow the orthodox thinking within the industry, you are probably looking at people who switch banks in their late 20’s or early 30’s, but we want to appeal to a broad generation. So, I may be wrong on this, but I think our primary appeal will be to a median age around 25 or 26. These people are not bound to the industry that I grew up in, and they are absolutely using technology on an increasing basis to manage their life and money.
Mark Mullen will present the case for Atom Bank live and in person at the Financial Services Club on 24th February (details here). Meanwhile, join us here next week for an interview with Craig Donaldson on the experiences of Metro Bank, who will also present at the Financial Services Club on 10th March.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...