Digital bank Atom tries to find its voice with £4m Will.i.am deal

One of Britain's new breed of banking start-ups has struck a deal with Will.i.am, the rapper and producer, that includes handing him an option over a multimillion pound stake in the business.

Sky News has learnt that Atom Bank, which has been created by one of the entrepreneurs behind Metro Bank, has agreed terms with Will.i.am to act as a consultant and board adviser as it seeks to differentiate itself in an increasingly crowded sector.

An industry source said that shareholders in Atom were briefed on the agreement earlier this month, although Will.i.am's identity has yet to be disclosed to existing investors.

The tie-up represents a bet by Atom chairman Anthony Thomson that the Black Eyed Peas rapper, who is a judge on TV talent show The Voice UK, will help the new lender carve out a distinctive presence on social media and other digital media platforms.

Under the deal between them, Will.i.am would have an option to acquire up to 3.55 million shares in Atom Bank at a price of £1.15-per-share during a three-year period.

In return, he will be expected to engage in public relations activity for Atom, attend board meetings and publish social media posts about the company.

The alliance is expected to be announced within weeks of Atom's shareholder meeting to approve its latest fundraising plan, which is due to be held early next month, according to one insider.

Sources said that Atom had received commitments from existing investors BBVA, Woodford Investment Management and Toscafund to inject a further £78.5m into the company, with discussions continuing with other institutions about raising roughly £20m more.

That investment is expected to mean that BBVA, one of Spain's biggest lenders, would own more than 30% of the company - a level that would usually trigger a mandatory offer for the remaining shares under the UK's takeover code.

Atom is said to be seeking a waiver from the Takeover Panel to avoid such an offer being made, as well as the approval of Britain's banking regulator, which is required when a single shareholder owns at least 30% of a regulated financial institution.

The completion of its latest fundraising - which will take the aggregate amount raised by Mr Thomson since he conceived of the digital-only bank to well over £200m - will represent a big boost to Atom's prospects.

The company, whose chief executive is Mark Mullen, the former boss of First Direct, said in December that it had taken more than £110m in deposits across its fixed-rate saver accounts.

It intends to diversify into mortgage products in the coming months.

The new capital will be used to fund anticipated early-year losses at Atom, as well as increasing regulatory capital to enable the bank to build its balance sheet.

Atom's founders believe there is a significant opportunity for a service-led bank with few of the overheads associated with high street branch networks.

The company has already attracted a list of blue-chip shareholders, including Lord O'Neill, the former Goldman Sachs economist and ex-Treasury minister, and Neil Woodford, the star fund manager who has indicated his antipathy towards bank shares because of huge misconduct costs.

Headquartered in Durham, Atom now employs more than 250 people.

Mr Thomson, who spearheaded Metro Bank's launch as the first new high street lender in more than a century and has become one of the sector's most respected figures, believes Atom will be well-placed to exploit the fast-growing demand for digital banking.

Lenders such as HSBC, Lloyds Banking Group and Barclays are in the process of closing hundreds of branches, citing data which has highlighted an explosion in the use of mobile banking services.

To date, however, efforts to encourage a new wave of challenger banks have resulted in a number of licences being approved by watchdogs, but new players have yet to make a significant impact on the industry.

Among the industry's other new players are Tandem Bank, Starling Bank and Redwood.

An Atom spokeswoman declined to comment on Monday.