Atom Bank, a new challenger bank that will only operate through an app on your smartphone and tablet, turned heads last year when it landed a huge £45 million ($68 million) investment from Spanish bank BBVA.
The 29.5% stake implies a valuation of £150 million ($226.6 million) for the bank, which has only just unveiled its app and has yet to fully launch to the public.
So why is it worth so much given it had zero customers at the time?
“What we saw in Atom is a credible team who had a lot of banking experience,” BBVA CEO Carlos Torres Vila told Business Insider at the Money2020 Europe conference in Copenhagen earlier this week.
Atom’s CEO Mark Mullen used to run HSBC’s telephone banking business and Atom’s chairman Anthony Thomson co-founded challenger bank Metro Bank. Other investors in Atom include star fund manager Neil Woodford and Jim O’Neill, the former Goldman Sachs economist famous for coining the term BRICs to refer to Brazil, Russia, India and China.
Torres Vila says: “They have the right ideas about how to do mobile only banking and at project level it was ready to launch very soon.” Atom this week unveiled its app, which was built on gaming platform Unity and features a lot of video.
Torres Vila says: “We had long held the ambition to enter the UK in a more traditional way. Over the years, we’ve looked at pretty much every piece that’s been on the market there. We always passed in the end for one reason or another. This was a different way [to get into the UK].”
BBVA’s head of new digital business Teppo Paavola added: “Why UK? The UK is a digitally orientated society where the population picks up new things and gets excited about new things. The team knows banking and has been proven to be very entrepreneurial as well.”
Torres Vila says: “Of course, it’s risky because it’s a startup bank and it’s not easy to start up a bank, but it has all the elements. It’s mobile only, the right team, and ready to go to market.”
Paavola says that the British banking market is also big enough for several challengers. He says: “You can certainly build a sizable business with a fraction of the total number of people who switch each year. It’s not like the whole market is going to change in three years and the big banks will be gone. That’s not how it’s going to go.”