Digital Banks Set To Change The Face Of Banking In UK  

Atom, Tandem and Mondo: these are the names of new startup digital banks in the UK that could change the face of banking during 2016 and beyond. If they succeed, it would lead to branchless banks, existing only in smartphone apps.

Traditionally, it was extremely difficult to start a bank in the UK with the process involving several years and millions of pounds in upfront capital. However, since 2013, the scenario has changed and over a dozen new banks have been authorised. These include two digital-only banks, Atom Bank and Tandem Bank, both of which were licensed by Bank of England in 2015. Both will be regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Mondo is also in this race to secure the regulatory nod.

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Atom Bank became UK’s first digital-only lender to secure regulatory approval in June 2015. It has already raised £135 million in capital. It expects to begin opening accounts later this year, focusing on its mobile app to target small and medium-sized businesses and consumers. The app is highly personalised and secured through integrated biometrics with logging in via facial or voice recognition. At present, it offers current and saver accounts for invited members but by the end of 2016 Atom will offer full range of banking products, from current accounts and savings to loans and mortgages for both personal and business customers. Atom is led by Mark Mullen, CEO who ran First Direct, the telephone bank set up by HSBC in 1989.

Tandem Bank was granted banking licence in late 2015 and plans to offer digital services including current accounts, credit cards, savings and loans through mobile apps and its website. Founded by Matt Cooper and Ricky Knox, the bank aims to offer good deals to people based on their spending patterns. As one of the founders says, “We want to build a bank that puts our customers’ interests first and by working in tandem with them as their partner in money.” It hopes to launch its products before the end of 2016. Tandem is focusing its marketing on millennials (born between early 1980s – 2000), calling itself a “good bank” and a “new bank built by people like you”. It has raised more than £100 million in capital so far.

Mondo has been founded by 30-year old Tom Blomfield, who is known for co-founding the successful direct debit processor GoCardless in 2011. Although it isn’t a legally-registered bank, yet its alpha service is running with a few thousand testers in the UK. Its app comes with budgeting tools that can diagnose your spending on real time basis. Initially, it will have no branches and offer just two products: a current account and an overdraft.

Mondo raised £5 million in a seed round funding. In February 2016, it raised £1 million in less than two minutes in a crowdfunding campaign on the Crowdcube platform. Unlike the other digital banks, Mondo is unique in building its own proprietary software. Mondo wants to make it possible to open an account without a human conversation, in under a minute and with as much starting capital as you want. Blomfield says, “We’re trying to be the Facebook for banking. We are building a bank for the people who live their lives on their smartphone.”

However, it remains to be seen if these banks will be able to snatch enough customers from the traditional banks to become major players. But it is clear that this disruption in British banking is going to fundamentally change several premises in the financial world.