Interview: Investing for the future
November 3, 2022
Launched as the UK’s first app-based bank, Atom arrived on the financial scene with a promise to transform the face of saving and lending. Six years later, and with a balance sheet of more than £5 billion, the Durham operator has done just that. Having come through Brexit, the pandemic and tumultuous Government upheaval, Atom is now rolling out a blueprint for the next phase of its journey, which includes quadrupling the value of its customer support. Here, Steven Hugill speaks to chief customer officer Ed Twiddy, to find out more about the bank’s response to the recent mini-budget, how it has navigated choppy economic waters and how it is ramping up its focus on skills and sustainability.
Ed Twiddy bends to sit in a purple-cushioned pod, resting his hands on a glass-covered work desk.
Above his head, and that of the structure’s circular roof, a high-rising rammed earth wall stretches up and outwards, a uniform of grey in an otherwise kaleidoscopic office.
Its pallidity, however, belies great significance.
For while it may not carry the vibrant palette of Atom’s colourway, its impact on the bank’s ultra-modern Durham-based Rivergreen Centre headquarters is no less striking.
Standing more than six metres high, its mix of sand, gravel and clay creates valuable thermal mass that moderates heat and humidity across offices, meeting spaces and corridors.
In a way, it’s the perfect reflection of Atom, which is regularly dipping a metaphorical thermometer into the country’s finances, absorbing data and sentiment before translating it into support that ensures savers, business owners and those on the property ladder are not left in the cold.
No amount of focus, though, could have foreseen the recent astronomical rise in the mercury delivered by the Government’s mini-budget, which parched the economy and left many a consumer’s plans equally scorched.
With lenders forced to pull hundreds of mortgage deals amid a radically changing climate, Atom too was moved to postpone decisions.
Now sitting on a grey sofa detailed with blue buttons in a high-ceilinged meeting and recreation space, Ed acknowledges the pain its decisions have had on customers – but says it was impossible to work in such a hot market.
He says: “Like everybody, we didn’t know how to fairly price mortgages after the mini-budget.
“It was an extraordinary moment, which put so much of a question mark against the price of money.
“And it was hurtful to people too.
“For mortgage customers already in a pipeline, thankfully – as far as I’m aware – no lender got themselves in a position where they couldn’t honour that pipeline.
“But then you had people who had submitted applications, or were looking for a decision, and the only way to treat them at all fairly was to ask them to pause for a minute.
“And that felt terrible, because people’s hopes and dreams are often so closely attached to their home or moving house – and there are plenty of reasons not to add anxiety to what is already a stressful process.”
He adds: “But when you’re locking in a mortgage, if you make that calculation at the wrong moment, then that is with you for a long time.
“A mortgage is a multi-year product – you’re not just pricing it for what tomorrow’s cost of living is.
“As a lender, you’re looking through a curve that reflects what the market is saying the cost of debt is going to be, and when that takes a shock move up, you have to think, ‘do I follow that, or do I hang on?’
“The intervention by the Bank of England has given a sense of stability, and some things have come back a little.
“As we move forward, the price of the mortgage market will be set by the big guys, and for us, it’s about being cautious.
“We’ve paused, and we’ll go back in when we understand more.”
The emotional ethos to which Ed alludes has been a fundamental element of the business since its inception in 2014, and its official market launch two years later.
As a sector, banking carries on its broad shoulders many labels, from those caused by perpetual headlines around bosses’ bonuses to consumers’ frustrations at not seeing the full benefits of interest rate rises.
Atom, though, says Ed – who left a role as the first director of the North East Local Enterprise Partnership to become one of the digital lender’s six original founding members – is different.
He says: “We’ve always prided ourselves on being there for savers, when others haven’t – and others still aren’t.
“Our one-year saver is at 4.1 per cent and selling like hot cakes, with our instant saver, at 1.9 per cent, providing a more than fair return.
“But many banks, while passing on some of each interest rate base rise, are keeping a lot more – which means a hell of a lot of cash not going to savers.
“Banks, of course, have to be risk averse.
“But, at the moment, they seem to be playing the old game of taking away the umbrella when the rain starts.
“We don’t believe that is right or necessary.”
And that mindset, reveals Ed, is having a profound effect.
Atom’s balance sheet recently tipped over the £5 billion mark, a hugely significant figure for a lender that has had to come through several socio-economic challenges without yet getting to the point of lighting the candles for its tenth anniversary.
The figure is also conviction of the blueprint rolled out by Ed and the senior team, which, from the very outset, positioned Atom as the UK’s first app-based bank dedicated to delivering services through a tech portal, rather than high street branches.
He says: “With everything you do in life, it’s sometimes hard to see things when you’re ingrained in them.
“We live day-to-day in the markets, but a figure like £5 billion is an important milestone and a moment to recognise.
“We’ve gone from convincing people we exist, and that the app in your phone is a safe and rewarding place to put your money, to launching business lending and mortgages.
“We’ve been voted Which? Money best digital lender for a fifth year in a row, and we’ve supported the Coronavirus Business Interruption Loan Scheme and Recovery Loan Scheme, which have been successful for us, and the businesses involved too.
“I’m not claiming we’re a saintly intervention, but, by lending wisely, sensitively and fairly, we’re bringing something useful to society.”
Ed adds: “We’ve been through a time of the big banks being ringfenced, separating retail customers from investment activities, which completely changed the mortgage market.
“We’ve had the post-Brexit period, and the massive increase of liquidity into banks through the Term Funding Scheme, and seen interest rates go to the floor.
“We’ve had COVID-19, which transformed lives and sent the housing market into lockdown and, either side of that, had a succession of political changes.
“We almost got to the point of thinking, ‘gosh, we’ve seen it all’ and then someone invades a country, you have a further massive change in the UK political landscape, and another dice is rolled…”
Ed’s voice trails away, but it quickly rises back up when he discusses Atom’s response.
It would have been easy to falter during those times, to feel, almost, a sense of self-pity, but, says Ed, its reaction was to the contrary, with the bank’s agile operation and clear aims and objectives providing a stable base.
And it’s one, he says, that is primed to help the lender – which previously attracted pop star Will.i.am as a board advisor – to take its £5 billion balance sheet to more than four times that amount.
Key to achieving this, he says, will be the enduring roll out of Atom’s “quite simple” business model, which is increasing revenue while keeping costs low.
He says: “You take savings in on one side and have an automated and expert risk machine in the middle that translates them into lending in the real economy.
“And if you arbitrage in the very best way possible between your savers and your borrowers, you stay thin in the middle.
“In the last financial year, we grew income by 200 per cent while costs rose by five per cent.
“And we think we can continue to do that, to become not just a £5 billion business, but a £15 billion, £20 billion or even £25 billion business.
“Once the jaws begin opening between costs and revenue, and you’re doing things fairly and transparently, why not?”
A growing business requires skills, and to that end, Ed says Atom has made noteworthy strides.
From its founding six, the bank’s headcount now stands at 480.
Around 430 of those are based in the North East, with a team of 30 developers in Poland and a number of home-based staff on “roving contracts”, who are supporting Atom’s expansion from the Highlands right down to Devon and Cornwall.
And while the pandemic’s breaking down of traditional employment barriers has added some strain to the operator’s access to talent, Ed says the bank nevertheless remains an extremely attractive proposition, with its previously introduced four-day working week proving particularly alluring.
He says: “The most difficult thing for us during the pandemic was the massive surge in demand for digital skills.
“We suddenly found our people were being tapped up by every other bank and retailer, who had realised the massive shift to online.
“We lost people and in response embarked on an employment exercise, with our four-day week a real recruiting sergeant.”
And while Atom was affected, Ed remains pragmatic about the wider economic benefits of employee dispersal.
He says: “For the North East’s sake, in many respects, the change brought by the pandemic has given a new lease of life to a tech sector that was already growing very quickly.
“Businesses have a home and a heart, but they don’t mind now if someone is in Cornwall or even the Faroe Islands.
“And it means there are a whole bunch of people in the North East earning extremely good money, working for businesses all over the world.”
As well as embracing the evolving talent landscape, Ed too has an eye on Atom’s responsibilities around sustainability and inclusivity.
He pinpoints targets he wants to meet over the coming years, which include making the lender carbon positive by the middle of the next decade and building on existing skills partnerships to help more people from diverse backgrounds.
He says: “We’re already a very low carbon business, but we want to be carbon positive by the mid-2030s.
“And from an industry perspective, rightly and understandably, regulators and the Government look to banks and say, ‘we expect you to account for the reasons why the industries and households you are supporting are going to be sustainable’.
“So working with our partners – such as the Durham Energy Institute – to help people live affordably, in a house fit to deal with climate change, is absolutely in our interest.
“But we also need to be truly reflective of society.
“We’re very proud of the work we’ve done with the Prince’s Trust, which has seen us act as a principal sponsor for young people not in employment, education or training, to provide them with skills for their futures.
“And we’re proud of our partnership with the Institute of Coding on the TechUP programme at Durham University, to help people, especially women, retrain for careers in technology.
“But we need to do more.
“Ultimately, employment is still the best way out of poverty – it’s the best way to stimulate your mind and meet new people, and to go and do something different.
“And we want to make sure such opportunities are available for all.”
He adds: “For us, it’s about sticking to the knitting, about facing the global problems down, facing the regional employment and opportunity challenges and making a real mark, while keeping things simple.
“Our watchwords are faster, easier and better value for money.
“We want to continue giving people back their time, continue making complicated matters simple and continue helping customers get more for their savings or get a mortgage more cheaply.
“We want to be double, triple, quadruple in size as quickly as we possibly can.
“And we’ll do it safely and sustainably, always with a mind to our customers.”