Environmental cost of crypto "profane and wrong": An interview with Atom Bank CEO Mark Mullen
The head of the UK's first app-based bank speaks to AltFi about Atom's IPO plans, crypto, and what separates the fintech giant from its traditional banking peers
Atom Bank might not be the new kid on the block, with the neo-bank disrupting traditional finance since 2013, but in 2022 Atom has truly come of age.
The neobank has cleaned up shop during the financial year, slashing operating losses from £36m to £2m and delivering its 1,000th secured loan to an SME customer.
Deposit and lending activities have been central to Atom Bank's reporting year, with its deposit balance up £1bn and its loans under management growing by £600m since the end of the 2021 reporting year.
This expansion in both areas have helped Atom record its first month in the green at the beginning of the year, which was followed by three consecutive quarters of operating profit.
“We wanted to break even this year, we achieved [that] and we reached an operating profit before the end of the year,” Mullen added.
With a year of operating profit under its belt and on the back of a £75m financing round led by BBVA that closed in September, going public is on the horizon.
“We will look to raise more capital, not urgently but certainly in the next 12 to 18 months. We are looking to list publicly next year," Mullen said.
Atom Bank's funding to date rests at £608m.
"People have to have a place to live"
Atom Bank's success comes amid a year of geopolitical and macroeconomic turbulence.
The UK is wading through the highest inflation in 40 years, with supply chain issues and the war in Ukraine helping to push the country's CPI to 9.1 per cent.
As of May, numbers from the Office of National Statistics show that housing prices have spiked 12 per cent year-on-year—reflecting prices last seen before the collapse of Lehman Brothers in 2008.
According to data from EY, demand for consumer credit is forecasted to drop to 7.9 per cent from the 12 per cent recorded during the pandemic, with mortgage lending down 0.5 per cent to 3.8 per cent year-on-year.
As interest, mortgage rates and inflation rise, UK households are struggling to repay their loans and are less willing to undertake large investments.
Despite the turbulent times, Mullen remains "optimistic" about the current situation faced by UK households and the property market.
"Our analysis is telling us that mortgage lending is a pretty good place to be. People prioritise where they live [and] making sure they protect repayments on mortgages is a priority as opposed to your Netflix subscription," Mullen explains.
Atom is bucking the trend when it comes to average standard variable rates (SVR) paid by UK mortgage borrowers, offering its customers an SVR of 4.65 per cent.
According to financial firm Moneyfacts, the average SVR rose in June to 4.91 per cent, up by half a per cent since December 2021 and the highest in over a decade.
"I think we'll see a slowdown in transactions and concerns about housing affordability. But we've got virtually no delinquency on our books and we've loaned over three-and-a-half billion pounds," Mullen says.
"You're not going to get more legacy-free than us"
As the UK's first app-based bank, technology has been central to Atom Bank as it aims to disrupt the financial services and banking industry.
Amid the 200 per cent surge in growth recording during the 2022 financial year, Atom managed to keep costs at a meagre 6 per cent, attributing its lean business model to its technology capabilities.
One of the main costs came from Atom's £4m hiring spree, bringing 22 new full-time employees and growing their tech-staff to 110-strong personnel—a quarter of the firm's total employees.
"Ultimately, the costs of banking are paid by customers. Our technology enables us to be dramatically more efficient than legacy alternatives," Mullen explains.
An example of a tech-capability comes from a lack in demand for customer support. According to Atom, 99 per cent of their new savings customers do not require any of their support channels to open their savings accounts.
Improving efficiency around Atom's fixed and instant access savings accounts is crucial since the firm does not offer current accounts like Monzo and Starling Bank, nor the transactional banking services provided by traditional banks.
Technology has not been the only innovative driver of the company's success during the 2022 reporting year.
Back in November Atom announced it would embrace a 4-day working week for all of its staff. Uniquely, Atom said it would not be reducing employee's salaries as part of the trend-setting change.
The change came following internal and review of employee preferences, with many expressing the desire to shorten their working week.
"After Covid people were burnt out and a 4-day working week is an investment into the competitiveness of the company as well as our staff", Mullen explains.
"No reconciliation with a commodity as destructive as crypto"
Despite Mullen being in favour of disrupting the 250-year-old banking sector, Atom Bank, alongside its peers, sits somewhere between traditional banking and the crypto space—the enfant terrible of the moment.
Since the inception of bitcoin in 2009, many of the services provided by the traditional financial services industry are now being offered by believers in decentralised finance.
For instance, London-based AAVE offers decentralised crypto lending and borrowing and decentralised exchange Uniswap allow customers to decide on their own crypto-to-crypto exchange rate.
In line with the growth of the crypto industry, the UK government decided to include stablecoins and "digital settlement assets" into the remit of regulators in the landmark Financial Services and Markets Bill.
"I think it's profane and wrong to consume the planet's resources in the creation of nothing and for the edification of nothing but profit," says Mullen.
According to a policy paper from the European Central Bank, the energy consumption involved in crypto mining is on par with the yearly energy consumption of countries such as Spain, the Netherlands and Austria.
The report suggests that emissions associated with bitcoin and ethereum mining have "negated[d]" the target greenhouse gas emission savings of most euro area countries.
However, more crypto projects are moving to less energy-intensive mining operations.
Ethereum is currently transitioning from a proof-of-work mining process that uses computing power to verify transactions to a less energy-intensive proof-of-stake protocol, where individual investors are chosen to validate transactions.
Although Mullen is concerned about the environmental damage caused by mining crypto, he does believe the nascent industry is deserving of some merit.
"The technologies that underpin these innovations have potential value, we've already seen lots of use cases," Mullen acknowledges.
"A constant learning journey"
Amid all the success, turbulence and crypto shenanigans, being part of Atom Bank's journey has been a "fantastic privilege".
After nearly 10 years at the helm of the neo-bank and 12 years at HSBC before that, Mullen relishes the challenge of disrupting an age-old industry.
Across the UK competition is stiffening. Funding into British fintech firms hit £7.6bn in the first half of 2022, with deals for mobile payment provider Checkout.com and Lendable reaching just shy of £1bn.
However, Mullen is unperturbed.
"It takes quite a long time to build something and have that endurance. I have huge respect for people who create and build companies," he said.
When asked about his plans for the future, Mullen added: "I'm not looking for a better gig. This is pretty cool."