The investment is part of BBVA's growth strategy to become one of the leading financial services firms in the digital age.
As a strategic shareholder and partner, BBVA will have two seats on Atom's board and will have the opportunity to participate in future funding rounds.
Francisco Gonzalez, BBVA's chairman and chief executive, said: "BBVA believes the digital market in the UK offers excellent growth opportunities and that digital banks that put the customer first are the future. BBVA's investment in Atom backs those beliefs in one move."
Atom Bank aims to develop a range of personal and business banking products and services that will be delivered using mobile apps, with a desktop version to follow.
The bank is one of the first real alternatives to traditional high street banking and is free of the existing banks’ branch and legacy costs.
Commenting on the partnership, Anthony Thomson, Atom's chairman, said: "In the 18 months since the founding team came together, Atom has now raised over £135m.
"This is a wonderful endorsement from investors to the compelling business case that the team has put together, and is a powerful signal to the regulators and most importantly for UK consumers.
"Now with BBVA as our strategic partner we really do feel that the sky is the limit for Atom."
The investment is part of BBVA's digital transformation. Earlier this year, the bank acquired leading user experience firm Spring Studio and in 2014 purchased big data and cloud-computing start-up Madiva Soluciones, and Portland, Oregon based Simple, a tech company that's changing the way people bank and think about money in the US.
BBVA also has strategic stakes in leading Silicon Valley start-ups such as lender Prosper, wealth management tool Personal Capital and Bitcoin wallet Coinbase through its US$100m US-based BBVA Ventures fund.
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