Finance in Lockdown: An Interview with Atom Bank
David McCarthy, CFO of Atom Bank, is one of the original founders of the UK’s first bank built exclusively for mobile. He earned his finance stripes as a CFO at the likes of Britannia and Bank of Ireland. We discuss Atom Bank’s origins, how mobile tech can keep money moving during national lockdown and how a traditional finance approach can drive start-up innovation forward.
David, the UK is entering a lockdown period where it’s going to be very hard to go into branch or continue with mortgage payments. As the co-founder of an exclusively mobile bank, do you believe that the ability to conduct everything via mobile is now more vital now than ever?
You’ve got your finger on the key point there. Being able to do things remotely, without unnecessary friction, is what most consumers simply expect now..
There’s a demographic who are not so used to banking remotely, but I’d say the majority of people are very comfortable with doing things on their mobile phones. To that extent, as long as someone is sitting behind the scenes making things work properly and can be at the end of a phone to answer questions, most banking processes don’t get disrupted by even extreme events like the one we are experiencing now, which I think is a very important point.
But we’re also using mobile technology to make the whole process more engaging and more efficient. For example, our quickest mortgage application was completed in just 14 seconds, because of the way we’ve engineered it. Savings accounts are opened in minutes without any requirement to exchange paper documents, which can be a huge asset in times like this.
That’s what we’re seeking to do: take banking processes that have existed for some time, digitise them, make them smoother and make them more efficient. There’s a high level of resilience embedded in such a model.
Is that where the vision for Atom Bank came from?
Yes. Atom is approaching six years old, so we’re not brand-new kids on the block. It actually takes a while to build a bank, it turns out.
There were a handful of founders, who got together with the same general idea and values. We saw opportunities to do banking better than we were seeing at that time. That, to some degree, may seem an arrogant and presumptuous claim, but we saw certain things that could be improved a lot.
Banks in general didn’t (and still don’t) have great customer reputations. At a technical level, they were wrestling with very old systems, high-cost bases, and branch networks which were at best in diminishing use. You could see where that was going to level off into the future, and how slow-moving the change was.
This was when we realised we could build a whole bank which existed entirely on your mobile device and therefore was with you at all times. We could see that phones were for much more than just communication; they were information devices, constant companions, and the tool that many relied on most in completing day-to-day tasks – which included banking.
Hygiene, in the sense of being able to do things remotely, without unnecessary friction, is what most consumers simply expect now.
Day-to-day personal banking is a utility you just like to get over and done with. We never expected that people were going to think, “Whoopee, I’m going on my banking app, that will be fun.” You want to do it efficiently and you want to do it effectively and if it can be mildly entertaining as well that’s great. We thought we could do that better.
And we have delivered on a basis consistent with that original vision. Our customers like us – we have the best Trustpilot ratings of every bank and our processes work efficiently and effectively. We are offering consistently well-priced and straightforward products.
We can do this because we aren’t just disruptive, we also come from traditional finance backgrounds. We’re digital, we’re a fintech, but first and foremost, we’re a bank. That may not sound too fashionable these days, but banking still fulfills a very important function for UK and global consumers. The point of difference between us and traditional banks is that we aim to do the basics better than them!
How much of your role as CFO involves stimulating innovation within the business and empowering the rest of your team?
Founders get to foster a culture of innovation from the outset and can move forward with new developments in a controlled way. We can’t rest on our laurels and don’t run the business that way.
Specifically, when you look into finance, it now tends to branch out into lots of other important business areas. As a CFO and a founder, you’re really at the heart of strategy, because you need to understand at a very detailed level your company’s vision and purpose, how it’s going to create value and how it manages risk.
CFO’s lead ‘decision support’ capability. Basically, putting processes and structures in place that ask: “how do we actually make decisions? How can we ensure they are rational? How do we do that using the new technology, AI, machine learning, that sort of thing?”.
We never expected that people were going to think, “Whoopee, I’m going on my banking app, that will be fun.” You want to do it efficiently and you want to do it effectively.
Then you’re at the source of data and information, so how do we use data to really understand what’s going on within the business and for our customers? The CFO role spills over into all those things, which are very much more fintech in style than traditional banks.
I’m not the person you’d talk to about technology innovation, it’s not my speciality. But I can help with innovation by helping my team make better decisions. I can ensure that they make decisions that work well for our customers and shareholders and develop the business so it’s strategically sound and copes with all sorts of different environments.
To that point, over the last few years, we’ve seen a lot of the so-called big nine banks making more forays into the fintech world, whether that’s buying up emerging startups or ploughing money into new solutions or modernisation. What’s your take on this dynamic shift?
The whole industry knows it’s got to move on with the digital agenda, it’s got to make itself more efficient and so on. These are not insights that are unique to the challenger banks, it’s very much understood by a wider range of banks.
Then you look at it structurally, there are advantages and disadvantages to being a startup. The big banks are large-scale established organisations with powerful brands. They also tend to come with big budgets, which is helpful because technology development is not easy and it’s not cheap.
The advantage for us though is that our bank was born digital and mobile-based. That’s what we do, that’s what we’ve always done. As a result, our mindset is already there, we don’t need any kind of cultural or organisational shift to modernise our thinking.
If you take that mindset into banking platform technology, and you’re re-engineering a platform designed for branches or big complex management structures created 20-30 years ago, a fresh perspective is incredibly important.
But as I say, this is not an easy battle. I certainly wouldn’t go and say that challenger banks have some massive overall advantage but we are very-well placed to move quickly and bring fresh thinking.
And the current state of the world is going to make it more and more difficult to predict the future of anything.
Yes. We’ve all got to respond to it with our heads screwed on, but we will get through this. The question is how quickly and in what form. What damage it leaves is a negative way of looking at it, but clearly there will be a lot of sweeping-up to do afterwards.
We saw a lot of that with the 2008 financial crash. It did change things quite profoundly, but this time round, maybe people will get used to working more remotely and more flexibly, for example. But it’s imperative for organisations like ours to respond to the digital environment and give customers those remote tools.
In the meantime, we need to support each other, control what we can control and look beyond the short-term.