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.”