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UK's new Atom Bank banks on a smartphone app instead of branches

The latest "challenger bank" looking to shake up retail banking could mark a big step forward for the fast-growing mobile payment sector.

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More of us than ever are abandoning queues at the bank to use a new generation of mobile payment and banking apps. Retrofile/Getty Images

A new British bank is banking that you're happy to manage your money on your phone. Atom Bank has been granted a licence by authorities and will be the first such institution to be focused on an app rather than branches or online banking.

Atom is the latest "challenger bank" looking to shake up the established retail banking giants in the UK. It's not the first bank to ditch branches, with British banks such as Egg, Smile and Cahoot requiring customers to do their banking on the Web. But it is the first new bank to firmly put the focus on an app, potentially marking a big step for the embryonic mobile payment sector.

Recent figures, reported by the Telegraph, suggest that Brits do more banking on their smartphones than online or in branches. According to Barclays, customers use the Barclays mobile banking app 26 times in a month on average, and the app receives 1,980 logins a minute. With apps like Paym, Barclays Pingit, Zapp and Apple Pay offering new ways to manage our finances and pay for stuff, apps are poised to change the way we move our money around.

"We're thinking like a tech innovator," says Edward Twiddy, Atom's chief operating and innovation officer. "Looking at how we can use technology and data to give the customer an altogether better banking experience. We believe we're the only new challenger bank in the UK currently looking to re-define an entire banking experience, with a full service bank sitting underneath it. We aim to be a serious alternative to the mainstream banks."

"We've taken inspiration from those brave enough to take control of the end-to-end customer experience. Names like Apple, Fedex and Southwest Airlines spring to mind."

Having secured the thumbs-up from the Bank of England, Atom now has to test its systems and raise a total of £75 million in capital before it can launch to customers later in the year. These requirements for prospective new British banks have been relaxed in recent years to entice new competitors to the industry; as well as Atom, other challenger banks taking advantage of the new rules include the already-launched Charter Savings Bank and 25 potential newcomers such as Starling.

To meet security concerns, Atom's app will be protected by face and voice recognition. "We've passed one of the most stringent tests of any business, getting authorisation from the Bank of England," says Twiddy regarding security, "and we will be a member of the FSCS [Financial Services Compensation Scheme], offering customers reassurance for any savings they place with us. We can't tell people to trust us -- we have to earn it!"

As well as checking your balance and carrying out other banking tasks in the Atom app, you'll be able to contact the bank's customer service team by phone, email or on social media. A desktop service will follow the app at a later date.

If you need to do something physical like withdraw or deposit cash, you'll be able to use ATMs and go into branches of an as-yet-unnamed high street bank.

Atom Bank may adopt Apple Pay, the iOS app that enables you to quickly pay for things with your iPhone both online and in the real world. Apple Pay launches in July and will be supported by eight UK banks, including Santander, HSBC and NatWest.

Based in Durham, Atom Bank is co-founded by Mark Mullen, former chief executive of telephone and Internet-based First Direct, and Anthony Thomson, the man behind Metro Bank. In 2010, Metro Bank became the first new UK high street bank in 150 years, and now has more than 30 branches around the UK.

"The announcement that Atom Bank will be the UK's first digital-only bank is exciting for consumers and the banking sector alike," said Matt Sanders, banking spokesperson at Gocompare.com. "The UK banking authorities granting a licence to a digital-only bank sets a precedent that could open the door for new challenger banks and more choice for consumers.

"Increasingly, customers are shunning traditional branches in favour of taking control of their finances digitally," Sanders said. "As such, this is a huge development in the market and could well be the start of the next generation of banking."