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The head of Britain’s first app-based bank talks to AltFi about Atom’s IPO plans, crypto and what separates the fintech giant from its traditional banking peers

Image source: MarkMullen/AtomBank.

Atom Bank may not be the newcomer, the neo-bank shaking up traditional finance since 2013, but in 2022 Atom has truly come of age.

The neobank cleaned up during the year, cutting operating losses from £36m to £2m and issuing its 1,000th secured loan to an SME client.

Deposit and lending activities were at the heart of Atom Bank’s reporting year, with its deposit balance increasing by £1 billion and its loans under management increasing by £600 million since the end of the reference year 2021.

“It was our strategy to lend, it’s no coincidence that we landed here. This is always what we planned to do,” Mark Mullen, chief executive of Atom Bank, told AltFi.

This expansion in both areas allowed Atom to record its first month in the green at the start of the year, followed by three consecutive quarters of operating profit.

“We wanted to break even this year, we hit [that] and we achieved an operating profit before the end of the year,” added Mullen.

With a year of operating profit under its belt and thanks to a £75m funding round led by BBVA which closed in September, the IPO is on the horizon.

“We will be looking to raise more capital, not urgently but definitely in the next 12 to 18 months. We are looking to go public next year,” Mullen said.

Atom Bank’s funding to date stands at £608m.

“People must have a home”

Atom Bank’s success comes amid a year of geopolitical and macroeconomic turbulence.

The UK is going through the highest inflation in 40 years, with supply chain issues and the war in Ukraine helping to push the country’s CPI soaring to 9.1%.

In May, figures from the Office of National Statistics show that housing prices have skyrocketed 12% year-over-year, reflecting prices last seen before the collapse of Lehman Brothers in 2008.

According EY dataconsumer credit demand is expected to fall to 7.9% from 12% recorded during the pandemic, with mortgage lending falling 0.5% to 3.8% year-on-year.

As interest rates, mortgage rates and inflation rise, UK households are struggling to repay their loans and are less willing to undertake large investments.

Despite the turmoil, Mullen remains “optimistic” about the current situation facing UK households and the property market.

“Our analysis tells us that mortgages are a good place to be. People prioritize where they live [and] making sure they protect mortgage repayments is a priority over your Netflix subscription,” says Mullen.

Atom bucks the trend in the average standard variable rates (SVR) paid by UK mortgage borrowers, offering its clients an SVR of 4.65%.

According to the financial company Moneyfacts, the average SVR increased in June at 4.91%, up 0.5% since December 2021 and the highest in over a decade.

“I think we will see a slowdown in transactions and concerns about housing affordability. But we have hardly any defaults on our books and we have loaned out over three and a half billion pounds,” Mullen said. .

“You won’t get more inheritance than us”

As the first app-based bank in the UK, technology has been at the heart of Atom Bank as it aims to disrupt financial services and the banking industry.

Amid the 200% surge in growth seen in fiscal 2022, Atom managed to keep costs down to a meager 6%, attributing its lean business model to its technology capabilities.

One of the main costs came from Atom’s £4m hiring spreebringing in 22 new full-time employees and growing their technical staff to 110 people, a quarter of the company’s total number of employees.

“Ultimately, bank charges are paid by customers. Our technology allows us to be significantly more efficient than traditional alternatives,” says Mullen.

An example of technical capability comes in the form of a lack of customer support. According to Atom, 99% of their new savings customers don’t need any of their support channels to open their savings accounts.

Improving efficiency around Atom’s fixed and instant access savings accounts is crucial since the company does not offer current accounts like Monzo and Starling Bank, nor the transactional banking services provided by traditional banks.

Technology wasn’t the only innovative driver of the company’s success in the 2022 benchmark year.

In November, Atom announced that it would adopt a 4-day work week for all of its staff. Uniquely, Atom said it would not cut employee salaries as part of the trend change.

The change came after an internal review and employee preferences, with many expressing a desire to shorten their working week.

“After Covid, people were burnt out and a 4-day work week is an investment in the competitiveness of the business as well as our people,” says Mullen.

“No reconciliation with a commodity as destructive as crypto”

Although Mullen favors disrupting the 250-year-old banking industry, Atom Bank, alongside its peers, sits somewhere between traditional banking and the crypto space, the enfant terrible of the moment.

Since the inception of bitcoin in 2009, many services provided by the traditional financial services industry are now offered by proponents of decentralized finance.

For example, London-based AAVE offers decentralized crypto lending and borrowing and decentralized exchange Uniswap allows customers to decide their own crypto-to-crypto exchange rate.

In line with the growth of the crypto industry, the UK government has decided to include stablecoins and “digital settlement assets” within the remit of regulators in the landmark Financial Services and Markets Bill.

“I think it is profane and wrong to consume the resources of the planet in the creation of nothing and for the building of nothing but profit,” Mullen says.

According to a guidance document from the European Central Bankthe energy consumption involved in crypto mining is comparable to the annual energy consumption of countries such as Spain, the Netherlands, and Austria.

The report suggests emissions associated with bitcoin and ethereum mining have “nullified[d]”the target for reducing greenhouse gas emissions for most countries in the euro zone.

However, more and more crypto projects are moving towards less energy-intensive mining operations.

Ethereum is currently transitioning from a proof-of-work mining process that uses computing power to verify transactions to a less energy-intensive proof-of-stake protocol, where individual investors are chosen to validate transactions.

Although Mullen is concerned about the environmental damage caused by crypto mining, he thinks the fledgling industry deserves some credit.

“The technologies behind these innovations have potential value, we’ve already seen many use cases,” Mullen acknowledges.

“A Constant Learning Journey”

Amidst all the crypto success, turmoil and shenanigans, being part of Atom Bank’s journey has been a “fantastic privilege”.

After nearly 10 years at the helm of the neo-bank and 12 years at HSBC before that, Mullen relishes the challenge of disrupting an age-old industry.

Across the UK, competition is getting tougher. Funding for UK fintech companies reached £7.6bn in the first half of 2022, with deals for mobile payments provider Checkout.com and Lendable reaching just under £1bn.

However, Mullen is unfazed.

“It takes a long time to build something and have that stamina. I have tremendous respect for people who start and build businesses,” he said.

Asked about his plans for the future, Mullen added, “I’m not looking for a better gig. It’s pretty cool.”

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