Janne Iivonen

The world of banking, says Anthony Thomson, has a dirty little secret: "Nobody actually cares about banks." But the 62-year-old British entrepreneur believes he can make people care about his new bank, Atom. The key? It's not really a bank at all. "I could make a compelling argument to say that Atom is actually a data company that happens to have a banking licence," he says.


Atom is the UK's first digital-only "challenger" bank to have been granted such a licence, beating others such as Tandem, Starling and Mondo to the punch. This new cadre of startups is the result of a post-credit-crunch regulatory shake-up that will mean 2017 is the year when consumers have the opportunity to manage their money with organisations that are digital first.

Once, the high street was dominated by the "big four" (HSBC, Lloyds, RBS and Barclays), but recent reforms make it easier to set up a bank. And, for the first time in more than 150 years, the Bank of England is welcoming new entrants. Metro Bank was the first, in 2010, but this was a bricks-and-mortar operation. When Atom opened for business in April, it was a new type of bank that's entirely online. At launch, the only product Atom offered was a fixed-saver account - current accounts, debit and credit cards, and mortgages are all scheduled to arrive by 2017. But at two per cent interest, it had the market-leading rate.

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Better returns are a crucial aspect of the challenger bank promise. According to Thomson, who was once chairman of Metro Bank but left reportedly frustrated at a reluctance to focus on mobile, high-street banks have to use 55 to 70 per cent of their profits to finance costs, whereas digital banks don't have branch networks and can pass those savings back to consumers. Yet the significance of operations such as Atom goes beyond VFM - as Mondo's CEO Tom Blomfield puts it, this is "an Uber moment for banks".

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Startups hope to transform banking through data analytics, providing services to entry-level consumers who previously relied upon a financial adviser. "You'll be able to see, for example, how much you have spent on trainers - and if you continue at that rate how much you will have spent in the next three years," Thomson says. "Traditional banks will give you last month's statement. We'll give you next month's." Furthermore, for business customers, Atom promises to spot problems before they develop. "If we discover that the time debtors are taking to pay you is getting longer, we can draw that to your attention."



Atom's competitor, Mondo, is perhaps best known in the tech world because it has run a series of hackathons to imagine new banking functions. Ideas include flagging up anomalies in bills, features for splitting payments in restaurants, and facilities to offer overdrafts if funds are on course to get tight. Analysts anticipate that challenger banks may also create products designed for freelancers, such as accounts that set aside money for tax returns, or mortgages that assess how income varies over the course of the year and adjust repayment demands accordingly.

These banks are assuming that the value of such services will entice customers to leave the big four. But what's to stop those established banks from simply mirroring the data-led approach? "One of the challenges the big banks have is that they can create these fantastic new apps, but they're still having to plug them into this back-office system," says Thomson. The reason they haven't upgraded is that transferring the data would be vastly complex. "But let's say they did solve it - they still have expense bases, legacy issues of real estate, legacy issues of balance sheets - it's impossible for them to be as agile."


And what about those vaunted predictive analytics? Consumers tend to hold accounts with various providers, so won't Atom only have a partial picture of their spending? "If you really want us to be your bank, then the more information you give us, the more personal we can be," Thomson says. "You pays your money and you takes your choice."

Charlie Burton is a regular WIRED contributor and commissioning editor for GQ.

The WIRED World in 2017 is WIRED's fifth annual trends briefing, predicting what's coming next in the worlds of technology, science and design