Mark Mullen talks to Scott Thompson about making the leap from first direct to new digital-only bank Atom, and the challenges encountered thus far and opportunities involved

ST: How long have you been in your current role and what have been the highlights thus far?
MM: I joined Atom formally in September of last year but I’ve been working with Anthony Thomson (co-founder and former chairman of Metro Bank) to develop and create Atom for a lot longer than that. And the highlights have been, well, how many people get to develop a business from a blank sheet, let alone a bank? Meeting so many new people, it’s like a completely different life. Seeing an industry from a fresh standpoint with an opportunity to do things differently, as I’ve been in this area for almost 30 years. It was a privilege and a joy to lead a business with the reputation of first direct (where Mullen held the position of CEO). But before first direct I spent a lot of time doing various different big jobs within the HSBC group. So I love financial services as an industry, albeit it’s justifiably had a terrible time since 2007. When I was looking at what to do next, it was a case of, go and work for another big bank, why? Go and find something like first direct, there isn’t anything out there. Or go and create something completely new. And the latter was by far the most appealing of those options. But you need a bit of good fortune and luck so there’s a certain serendipity in that things came together at the right time.

ST: Why have none of the traditional banks followed this strategy and created a new brand with a completely new IT infrastructure? first direct was that but it didn’t exactly spark a revolution. There hasn’t been a flurry of activity since its launch.
MM: Yes, first direct was that. We’ve seen the likes of Intelligent Finance and Smile, so there have been new entrants and/or new brands created by the financial services companies. Most of them were attached in some way to the mother ship so very few of them were completely separate, very few had bespoke or completely new IT systems and any that did are now getting a bit long in the tooth. I suppose the answer to your question lies somewhere in the midst of the financial crisis; since then the banks have been trying to consolidate, restructure etc and also play catch up on their core systems. This would be another opportunity but also another problem and they’re trying to solve problems not create them. To some extent it’s easier to do this from a standing start than from within the culture and complexities of an existing player, which I really wouldn’t underestimate. The culture of a big, longstanding institution is not that of an innovator or a startup. I can tell you that from first hand experience.

ST: What are the biggest challenges and opportunities facing Atom?
MM: The biggest challenge is that the process of designing a new bank and obtaining a banking licence is complex and justifiably so, it’s not like we’re opening a cornershop. It requires significant investment. And technology is also complex because you’re marrying new and old worlds as you still need core banking systems, systems that are capable of managing tens if not hundreds of millions of accounts. On top of that you need to be able to create a very flexible, imaginative and engaging customer experience. It’s a technical challenge to choose the right tools, partner with the right people, choose the right infrastructure, test it, develop it etc, the whole process is time consuming, expensive and fraught with stress. The opportunity is to do something new as opposed to pricing a bit differently or tweaking this or that. We can do a lot more than that. We can engineer our entire model to serve and benefit our customers so we’re capable of offering low prices. Very few existing businesses can do that. Also, we don’t have to choose to be for everybody. That’s a huge advantage as businesses that try to serve everybody all of the time have a great deal of difficulty, at least when they’re starting up. Whereas most banks have to do that, they’re universal banks, they’ve been around for hundreds of years and they grew by acquisition. When you buy banks you get what you bought, not what you chose. You’re talking about serving everyone from your eight year old saver to an eighty year old pensioner. I wouldn’t underestimate how complex and difficult that makes the delivery of banking for the big FIs.

ST: Who, then, are Atom initially targeting?As a digital-only venture, is it millennials?
MM: That’s a very good question and one that we’ve thought about endlessly. The short answer is, we’re targeting a mindset and that mindset is about digital, but it’s also about innovation and the future. If you have people who are emotionally bonded to the way in which banking currently works, they’re probably not for us. That’s OK. But if you have people who are willing to reappraise what a bank actually is and how they should be benefiting and getting value from it, then that doesn’t have to be an 18 year old, it can be an 80 year old. It’s a mindset about whether people value the traditional way in which current accounts are delivered via branches etc, if so, they are well served by the many banks out there offering that. If they value a bank that focuses all of its energies on its digital offer, we’re more likely to appeal to that customer. There’s another practical point which is that people’s willingness to move banks declines as they get older, financial behaviours become more entrenched as their complexity of needs increases. We are likely to be more appealing to younger people but we have to produce a product and a brand that they like, and that’s not an easy challenge. We’d like to be there but we’ve got to prove ourselves.

ST: Being a mobile only bank, do you think that (particularly among older people) there might be concerns around security? Whatever the rights and wrongs here, a fear of the new comes up a lot. There is so much consumer research highlighting mobile payments security concerns.
MM: It is a huge question. Anything that’s new will be challenged. The question becomes one of loss liability, do customers lose money or are they recompensed for any loss? Traditionally the primary risk has been with the bank and that’s not likely to change any time soon. You have to find the right balance, the size of payments, the process of creating confidence, the levels of authentication. Make no mistake we’re making a huge investment in identity and authentication, and also in the protections we offer customers if something goes wrong. We’ll stand behind our brand. It’s a very, very big market so if security concerns are a big thing for customers, they’re probably not for us and that’s fine. The mobile banking market is growing faster than any other distribution channel and there’s no going back from that. The distinction between desktop vs cloud-based or portable technology is largely semantic now. It is a challenge for the industry but technology has become inherently mobile so it stands to reason that banking should be mobile as well. Why on earth would someone get in their car, pay for parking and stand in a queue at a branch? It makes no sense to me and hasn’t for some time. I’ve banked personally with first direct for the last 20 or so years. In the 21st century, you shouldn’t be tied to any particular distribution outlet or any fixed position experience. It should be in your pocket.

ST: But do you think there will always be a market for the High Street branch? TSB, for instance, has been making a big song and dance about investing in its branch network. Metro Bank places a great emphasis on its ‘stores’.
MM: Do I think people will want to talk to people, both now and in the future? Yes. But you don’t need to spend millions of pounds a year running big branches. I think it’s a ridiculous waste of money. If you’re selling shoes, it’s a personal style thing, but you’re selling advice and/or money, not a physical product, and the last time I looked my money was the same as everyone else’s money. Technology can deliver face-to-face conversations and it can do it brilliantly and at minimum inconvenience to the customer. There is no pot of gold sitting in a safe somewhere representing your bank account, it is literally bits and bytes, that’s what banking is today and has been for decades. When people say they’re opening branches, they’re actually extending their brand and that is the biggest role the branch has to play. It creates a familiarity and that helps build trust. So there is a reason for branches, but it’s not to serve customers. It’s to make people aware of your brand, but frankly why not just buy a poster site? It’s a really old fashioned way of doing things. But then I have no monopoly on being right, it just happens to be my belief.

ST: Anthony Thomson is the co-founder and former chairman of Metro Bank. As already mentioned, the bank’s model is based around the High Street and it continues to open new stores. But these days he is rather vocal in his belief that bank branch usage has fallen off a cliff.
MM: There’s a reason for that though, in fairness. Anthony started to think about launching a bank in 2007 and Metro Bank opened for business in 2010. In 2008, the iPhone launched and then the app store and the iPad and in those three innovations you’ve got seismic behavioural shifts taking place across various industries, not just banking. It has transformed the sector, something strange happened, it was a technological catalyst making it happen and it’s just accelerating. The speed of downloads is getting faster and faster, look at the roll-out of ultra fast, fibre-based broadband, the advent of 5G. Therefore the limitations of devices and connectivity are being removed. What you have in myself and Anthony are two people who genuinely believe that customers should be served well and haven’t been served well by the banking industry for years. I struggle to understand why you would build a branch-based bank today.

ST: Turning to the seven day current account switch service, the level of switching remains low and none of the new entrants have made a dent into the big retail banks’ market share as of yet.
MM: There are a whole bunch of things playing into that. People are conservative with their money, it’s an emotional thing linked to their self-worth and their futures. The nature and quality of the alternatives is an opportunity for us. Switching has tended to be driven by price and there’s not necessarily anything wrong with that. But if it’s the only way they’re competing, it tells you that the banking industry has run out of ideas when it comes to innovation. So there’s an opportunity for brands that are genuinely different. I also think that if a bank is spending millions of pounds a year on marketing, why should anyone be surprised that it’s a brand which many people are familiar with? The only way you can compete as a startup is to spend more money on marketing (which is unlikely to happen) or be better, be competitive on price but most importantly be innovative. Why on earth would you go to all the trouble of moving your account if you thought the destination bank was no better than the one you were leaving?

ST: There’s a disclaimer on your website: ‘Atom isn’t yet a bank, but we’d like it to be. So we’re applying to the PRA and FCA for authorisation to become one.’ What is the current state of play with the banking licence?
MM: Our formal application is with the regulators, we’re in constant dialogue with them and have a very good relationship. And they will act when they’re good and ready. We have no reason to believe we won’t be launching in the second half of this year as originally planned. But we have to respect the regulator’s decision making process.

ST: And you’ll be offering a typical range of banking services, deposit accounts, credit and debit cards etc?
MM: We will offer a full range of personal and business accounts and we will deliver then through app-based banking, mobile devices but also desktop devices. We will also provide customers with a facility to enable them to make cash and/or cheque deposits but we are not yet in a position to confirm how or who we will partner with to do so. We’ll support all of this with a UK-based contact centre, available all day, every day. It’s a not a case of, here you go, look after yourself. We’re creating a high quality experience and customer journey.

ST: Finally, if we jump forward five or so years from now, where would you like Atom to be?
MM: We have a business plan with growth numbers. For obvious reasons I can’t go through it with you during this interview but it’s one we have shared with our investors and the regulators. What’s most important for me is that we have a fantastic reputation, quality trumps volume every time. We will move out only as quickly as our quality standards allow. We’re not trying to build a brand in a day. Our belief is that it’s a brand that should be associated with innovation and excellence. That’s where I want Atom to be in five years. If we achieve that, I’m pretty sure the customers and revenues will follow. But if we don’t get to that point, we’ll be just another bank. And I don’t want that. I want us to be a byword for brilliance.

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