Atom Bank: Meet the bank that is having to turn away customers

Atom Bank doesn't have any branches and directs all account holders to its app

Atom Bank CEO of Mark Mullen addresses delegates at the annual Confederation of British Industry (CBI) conference in central London, on November 21, 2016. / AFP / Justin TALLIS(Photo credit s
(Image credit: This content is subject to copyright.)

Over the past few years a number of so-called challenger banks have opened in the UK hoping to steal some custom from the long-established but unpopular high street banks. Most of them are slowly but surely building up a small customer base, but one is attracting so many customers it has started turning people away.

Here’s everything you need to know about Atom Bank.

What is it?

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Atom Bank is a highly unusual new bank because it is entirely app-based. There are no branches, no call centres and even the website just directs you to download the app on to your smartphone.

The bank only launched last year, but it has a very experience team leading it. Chairman Anthony Thomson successfully launched Metro Bank in the UK in 2007, while the chief executive officer is Mark Mullen who left his job as the boss at First Direct to join Atom Bank.

What does it offer?

At present the bank only offers savings accounts, but its low overheads mean it has been able to pay interest rates that have propelled it straight to the top of the best buy tables. As a result savers, desperate for a half-decent return on their cash, have quickly abandoned their old banking habits in order to download the app and open an account.

But the stampede of new customers has left the bank having to cut rates to reduce the inflow of money.

“After breaking the 2% interest barrier for a one-year bond in February Atom Bank cut it twice in a week, to 1.8 per cent and then 1.6 per cent,” reports The Times.

In just 24 hours On 9 March, the last day on which people could sign up for its market-leading one-year bond before the rate fell, the bank gained 5,000 new customers. It’s an astonishing figure, especially when you consider that, “13 of Britain’s 44 building societies have fewer than 20,000 customers,” says Amelia Murray in The Telegraph.

Why is it turning customers away?

The huge surge in new customers has caused the bank to cut its rates so that demand will ease. As well as the cut to its one-year fixed rate account the two-year fixed rate has fallen from 2.1 per cent to 1.7 per cent, the three-year fix is down from 2.2 per cent to 1.9 per cent and the five-year option is now 2.25 per cent rather than 2.4 per cent.

The rates are still highly competitive – table topping in some cases – but the hope is by cutting them back slightly there will be fewer new customer applications.

So, why an earth would a bank want to put off customers?

“We are a start-up business and a responsible bank, so we need to control the flow of money in and out,” a spokesman for Atom Bank said.

“Because we’ve had lots of savings customers join us in the past few weeks, we’re reducing our rates to ensure we’re taking a balanced approach.

“As a new digital player, you’d expect the bank to be designed to increase and decrease rates quickly to meet the demands of its business, so don’t expect us to conform to market norms.”

What does the future hold?

2017 is going to be a big year for Atom Bank with plans to launch residential mortgages, personal loans and current accounts after raising £83m from major shareholders earlier this year.

It is also likely that savings rates may rise again in the future once the bank feels it is ready to cope with another influx of new customers.

But, the success of Atom Bank will not have gone unnoticed by other challenger banks and the high street stalwarts. We may soon see more banks offering app-only deals as they look to cut overheads and win customers away from the new kid on the block.

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