Atom Bank has registered nearly 40,000 potential customers of which only 2,000 have opened accounts, in an early sign of the challenges start-ups face as they attempt to exploit the shift to mobile banking.
The UK’s first app-based bank, which is backed by Spanish lender
About 2,000 customers now have £18m in savings balances, according to figures obtained by the Financial Times. The bank has attracted more than £36m of applications for secured loans in the two months since it started offering business banking, with £14m approved.
The figures — a small fraction of the overall multibillion pound UK retail banking market — underscore the battle start-up banks face as they attempt to build scale.
Atom, which was founded by Anthony Thomson, the former chairman of
“We are really pleased to see that people are showing confidence in Atom by opening Fixed Saver accounts with us and to see that businesses are taking advantage of our secured business lending opportunities,” said a spokeswoman.
“We only recently started to advertise our Fixed Saver accounts … and have already seen a high conversion rate of those who have expressed interest.”
The bank said it had seen the most interest in current accounts and expected these would have “a much higher conversion rate” among customers that have preregistered.
A number of other mobile-focused banks are also planning to open. Tandem, founded by technology entrepreneur Ricky Knox, received its banking licence at the end of last year. Starling and Monzo have gained licences in the past couple of months.
These new banks are focused on customers who want to manage their finances via mobile. Consultancy firm CACI forecasts that the number of branch visits will almost halve over the next four years as more people turn to mobile.
Branch visits are expected to fall to 268m a year by 2020, while mobile app usage is on track to more than double to 2.3bn.
Number of ‘challenger’ start-ups that are applying for licences
Some 20 start-ups that are seeking to “challenge” the established high street banks are applying to the regulators for licences.
However, in spite of the innovative services they offer, challenger banks face a number of hurdles.
Scale is a particular issue.
Warren Mead, global co-head of fintech at KPMG, said in a recent report: “Small challengers and digital-only banks are building a personalised, transparent and data rich banking environment, completely free from the restrictions of legacy systems and culture.
“But in a market where customer inertia is one of the most powerful forces, will they be different enough to reach scale?”
A number of challengers are still lossmaking. Metro Bank, which emerged in 2010, hopes to break even this year.
The Brexit vote, lower-for-longer interest rates and potentially weaker economic growth is expected to weigh on new, UK-focused banks.
Analysts at Citi said after the EU referendum that an economic slowdown would impact loan growth and create a “tougher” environment for small businesses, which is where a number of new specialist banks such as