All major banks today offer a way for customers to bank online, but this is not stopping a rush of startups emerging to build new, mobile and online-only banks from the ground up. In one of the latest developments, Atom Bank, a UK mobile banking startup and app aimed at hip, youthful consumers that has yet to launch its commercial service, is today announcing that it has closed an £82 million ($128 million) round of funding.
The round is being led by strategic investor BBVA — the Spanish-based banking giant that last year acquired U.S. online banking startup Simple for $117 million. BBVA is taking a 29.5% stake in Atom Bank for £45 million ($68 million), working out to a post-money valuation for the startup of £152.5 million (just under $230 million).
Other investors in this round include previous backers Woodford and Toscafund, as well as Marathon and Polar Capital.
The total raised by Atom to date is £135 million, and the company, which picked up a banking license in June, says that this will be the last money it raises before launching to the public in early 2016.
Fin-tech entrepreneurs have seized on the wide proliferation of smartphones and broadband connectivity to build a number of online and mobile banking startups across Europe, the U.S. and elsewhere.
The idea behind these startups is to disrupt the current banking regime by doing away with the extra costs of running brick and mortar operations, and passing on the savings to their digital-savvy consumers. (Developing markets like Brazil, in fact, are particularly interesting in this vein, given their high proportion of unbanked consumers who own and use smartphones.)
Amid a very crowded field, Atom Bank has caught the eye of investors partly because of its pedigree. Founder and chairman Anthony Thomson was the co-founder of the UK’s low-cost flexible banking outfit Metro Bank. And its CEO is Mark Mullen, the former chief executive of first direct, HSBC’s groundbreaking telephone/online-only bank.
The other thing that Atom is banking on (excuse the pun!) to set itself apart is its square focus on 18-34 year-olds and providing a financial experience that meets their expectations of services today.
In the lead up to Atom’s invite-only beta and full commercial launch, the company — which has been described as the “Uber of banking” — has been teasing details of its service, promising to deliver a new kind of bank to a new generation of hipster savers and spenders.
The app — which will be the primary way that customers interact with Atom — has been designed by a team of engineers who come from the gaming industry. And the idea will be to use newer innovations in areas like push messaging, machine learning and anticipatory computing to make Atom’s banking services easier to use and more likely to be engaged with.
“Life can be predictable, so why not your banking?” Atom’s site reads in one of its teaser panels entitled ‘Telepathic’. “The more we learn about how you like to bank, the better we’ll get at keeping you one step ahead. Foxtrot anyone?”
In addition to personal banking and savings, Atom aims to offer other services such as business banking, loans and mortgages, and potentially some kind of social media forum that it describes only as “shared wisdom” for the moment on its site.
BBVA would not comment on whether it planned to take some of Simple’s technology or services to the UK market — or for Simple to potentially expand its offerings based on what Atom has built, but it seems like an obvious way for BBVA to utilise its Atom investment. More generally, the bank has a separate $100 million BBVA Ventures fund that it invests market-by-market.
For Atom, the BBVA connection could help it with marketing as well as help with bigger technical challenges and operational advice down the line. And as a bank with no large retail presence in the UK, BBVA has no competitive conflict with its Atom investment.
“We have long admired BBVA’s vision and leadership,” Mullen said in a statement. “Like us, BBVA firmly believe [sic] in the power of technology to transform customer’s lives for the better. We share their commitment to place the interests of customers at the heart of everything that the bank does, and the shared values and relationship between us that has built up over months of interaction have been critical to knowing that they are THE strategic partner for Atom. It is a huge vote of confidence in our team, business model and indeed the future of competition in UK banking that BBVA are coming on this journey with us.”
As part of the investment, BBVA is taking two seats on Atom Bank’s board.