* Aims to take advantage of decline in bank branch usage
* Will provide services to individuals, businesses
* Backed by range of private, institutional investors
* In process of applying for banking licence
* More branch closures expected as customers move online
(Adds background on industry-wide decline in branch use)
By Matt Scuffham and Steve Slater
LONDON, April 9 The founder of British banking
newcomer Metro Bank plans to launch an online lender, hoping to
take advantage of a sharp decline in the number of customers
using branches and challenge established rivals.
Anthony Thomson, who stepped down as Metro Bank chairman in
2012, said he would lead the new venture called Atom alongside
Mark Mullen, who last month resigned as chief executive of First
Direct, the online bank run by HSBC.
Britain's financial regulator and lawmakers are keen to see
new banks emerge to break the dominance of the country's biggest
banks - Lloyds Banking Group, Barclays, HSBC
and Royal Bank of Scotland - which control about
three-quarters of the personal current account market.
They believe a lack of competition was a factor in scandals
such as the mis-selling of loan insurance and complex interest
rate hedging products, which have cost banks around 25 billion
pounds in compensation payouts.
Thomson said on Wednesday there was a growing trend for
customers to bank online instead of in branches and the
marketplace had changed dramatically since 2010, when Metro
became Britain's first new high-street bank for over a century.
"Bank branch usage has fallen off a cliff. Telephony as a
means of accessing bank accounts is in decline. All of the
explosive growth is in digital generally and mobile in
particular," Thomson said.
Thomson is one of several British retail bank executives to
have told Reuters that the proportion of transactions taking
place within branches is falling and that the pace of that
decline is accelerating.
A senior executive at one of Britain's biggest banks said
the number of transactions taking place inside branches was
falling by about 8 percent a year and that number was
corroborated by other industry sources.
RBS said this month that branch footfall had fallen 30
percent in the last three years and announced the closure of 44
branches. Industry sources say hundreds more could be shut by
Britain's biggest banks in the next few years.
The biggest five British banks have cut 912 UK branches
Lloyds, Britain's biggest retail bank with the largest
branch network, pledged in February 2012 to keep all of its
2,900 branches open for at least three years, but industry
sources expect Chief Executive Antonio Horta-Osorio to re-assess
that commitment as part of a strategic update later this year.
HSBC has cut 284 branches, or 19 percent of its network, and
Santander, RBS and Barclays have cut 9-12 percent. The reduction
has been gradual - Barclays, for example, has closed about 30
branches in each of the last five years.
Thomson said he still believed there was a role for branch
banking but forecast that the proportion of transactions taking
place online will continue to rise.
He intends to retain his "significant" shareholding in Metro
Bank which has 22 branches and plans to expand to 150 by 2020.
"There is absolutely a space for Metro Bank because there
are still people who use branches. We're not saying Atom is a
bank for everyone," he said.
Banks are expected to encourage customers to stop using
branches for routine transactions and are changing layouts to
better use technology, and will increasingly consolidate several
branches into a more open "flagship" site.
Thomson expects Atom, which will have no branches, to open
for business in 2015. It will offer a full range of services to
personal and business customers including current accounts.
(Editing by Erica Billingham and Keiron Henderson)