Digital-only challenger bank Atom wins licence in UK
Digital-only challenger bank Atom wins licence
The Durham-based lender hopes to offer products to
customers later this year
By Tim Wallace 3:33PM BST 24 Jun 2015
Atom Bank has received its full licence from the Bank of
England, moving the digital-only lender one step closer to opening to
customers.
The Durham-based lender plans to offer a full range of
consumer and business accounts, loans and savings products, and expects to
start serving customers this year.
It will launch through a mobile application, with a
desktop computer service to follow at a later date.
Atom’s licence comes with restrictions, as its systems
need further testing before regulators let the new bank go live.
It paves the way for Atom to get a settlement with the
Bank of England and to start to run tests to ensure its IT systems integrate
properly with the wider payments system.
Atom also needs to finish raising the £75m required to
meet the regulatory capital rules. Star fund manager Neil Woodford is among the
bank's biggest investors, alongside venture capitalist Jon Moulton and the
former Goldman Sachs asset manager Jim O’Neill.
Chairman Anthony Thomson expects the bank to have a major
impact on the market.
“Mobile banking has overtaken branches, telephones and
even internet transactions,” Mr Thomson said, citing research published by the
British Bankers’ Association last week.
“In four or five years’ time, we want to have 5pc of the
market. We think we are the first real alternative to the high street banks –
we have no branches, no legacy costs, no legacy IT systems or legacy balance
sheet.”
Mr Thomson previously co-founded of Metro Bank, another
challenger which opened in 2010 and takes a different approach. MetroBank
operates high street branches which are open seven days a week and offer extended
opening hours.
He is establishing Atom Bank alongside chief executive
Mark Mullen, who used to head up First Direct, which is HSBC’s digital bank
brand.
Mr Thomson expects Atom to break even in two to three
years.
He said that there is still plenty of space in the market
for an alternative bank like Atom, despite the recent influx of new banks
joining the market, including Aldermore, Shawbrook and Virgin Money, as well as
other digital-only banks, such as Starling.
“There are 64m current accounts in the UK, and we only
need a tiny proportion of those to become very successful. The current account
switching service (CASS) sees about 120,000 switchers per month, but all of our
research tells us that is only the tip of the iceberg,” Mr Thomson said.
“CASS means you switch your whole account, everything
from bank A to bank B. The data show us there is a much bigger number of people
who open a new account, but don’t close the old one until they are happy the
new one is working well.”
The current licencing system was established to make it
easier to set up a new bank. Previously, a catch-22 situation meant that
would-be banks could not get authorised until they raised enough capital and
hired suitable executives, but investors and staff were reluctant to join
before the licence was granted.
The new two-step system is designed to overcome this
hurdle, and appears to have succeeded – the Bank of England said it authorised
five new banks in the 2014-15 financial year, and is in talks with 25 other
prospective banks.
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