The impact that digital technologies are having on financial services was underlined this week with the announcement that Metro Bank founder, Anthony Thomas, and First Direct Chief Executive, Mark Mullen, are to launch Atom, the UK’s first digital bank, next year.
The bank, “designed entirely for the digital age”, will have no branches and will instead operate through online and mobile channels, making it the first of its kind in the UK.
In the last few years, a number of digital banks have emerged across Europe and the US, which have proven to be popular with consumers. In Poland, BRE’s digital-only subsidiary, mBank, quickly became the country’s third largest retail bank. As a result of its success, BRE dropped its existing branding and now operates as mBank. Similarly, US digital banks, Simple and Moven have gone from strength to strength. These banks have no branches, instead facilitating transactions through websites and apps. In the past year alone, its customer base of young people has grown by 330% to 100, 000. Just last month, the company was acquired by forward-thinking Spanish bank BBVA for a cool $117 million.
The UK, by contrast, has been slow to follow suit – until now. Like its American and European counterparts, Atom will be a purely online bank. This move away from the branch is a result of a fundamental shift in consumer banking behaviours. According to the British Bankers’ Association, the number of transactions carried out per week through apps more than doubled from 2012 to 2013 to 18.6 million. And just last week, RBS announced the closure of 44 banks after seeing a 30% decrease in in-branch transactions since 2010.
In Thomas’ own words ‘opening branches now would be like BT putting phone kiosks back on the high street.‘ So does the emergence of digital banks like Atom mark the end of the branch as we know it? Not necessarily. Whilst branches may not be the hubs for transactional support that they once were, they’ll still have a role, albeit an alternative and lesser one to play, argues Brett King, founder of Moven.
What the emergence of banks like mBank, Simple and now Atom marks is that the financial services sector is starting to respond to today’s digitally empowered consumers and their desire for their interactions with financial services firms to reflect the intuitive, digital experiences they’re used to receiving from consumer brands. This is great news for consumers. By offering something new, banks like Atom are increasing competition in the sector and providing traditional financial services providers with the impetus to innovate their offering.