Should I ditch my high-street bank for a mobile app?
I’ve had a current account with the same high-street provider for 30 years. Everywhere I look, I see adverts for banks that have no branches, and are operated by a mobile app. Should I switch?
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You’re right – where I live and work in London, I can’t pass a tube or train stop without seeing ads for the likes of Monzo, Starling Bank and Tide. These financial technology firms are attempting to disrupt what was once thought to be an uncrackable market and steal customers away from the high-street behemoths like Barclays, HSBC, Lloyds Bank, Halifax, NatWest and Santander.
They’re certainly making some headway. Monzo now boasts more than 2.5 million customers, Starling Bank has around 700,000. Monese, another app-based provider, now has one million people using its services.
So, what’s the appeal? Well, some of it is undeniably cool branding – Monzo has a vibrant ‘hot coral’ debit card, while Starling offers a turquoise ‘vertical’ debit card. Others are offering metal cards as well, but in my opinion that’s just window-dressing. These companies have harnessed technology to provide frictionless access to your money at your fingertips in a way that bigger, older banks have been unable to do so.
There are some common features amongst these mobile-only banks – real-time notifications every time you spend; in-app budgeting tools and categorisation of your spending; the ability to freeze your card if you’ve lost it in the app; and fee-free spending when you use your card abroad. Some put limits on overseas cash withdrawals (Monzo and Revolut at £200) whereas others (Starling) allow unlimited withdrawals.
These brands have begun to diverge in what they offer as their customer base has grown. Monzo now partners with a range of savings providers to offer you access to Isas and savings accounts, offering fairly decent, if not table-topping rates, which can all be managed in your app.
It now has a range of paid-for accounts – Monzo Plus – which offers either travel insurance or merchandise and discounts for a monthly fee. Most recently, it launched a loan offer, again using smart tech to give you personalised rate before you even apply.
Starling Bank now offers business current accounts and euro accounts in addition to loans. It pays credit interest of 0.5% up to £2,000 and 0.25% on up to £85,000.
The big banks have taken notice of this. Many now offer the ability to freeze your card, and are introducing even more insight into your spending and budgeting. RBS has launched a separate app for budgeting, and is even working on launching a mobile-only brand called Bo.
Most of these brands operate like any other bank account – you get a debit card, sort code and account numbers, you can make bank transfers and direct debits and you can withdraw cash. But there is a crucial distinction in terms of the protection you get should the worst happen and the bank goes bust.
Not all of these ‘fin-tech’ firms have jumped through all the hoops to be properly authorised by the UK’s financial regulator and gain a banking license. If they have, it means up to £85,000 of your money is protected by the Financial Services Compensation Scheme – a vital protection if your provider does go to the wall.
My suggestion to you is to go ahead and open one of these accounts. I’ve got four of them, and still have an account with the high-street bank I joined 18 years ago.
Maybe one day, I’ll make the jump and switch, but very few come with minimum funding requirements so it’s very easy to run them alongside another account. These accounts often don’t carry out a hard credit search when you apply, and a card will land with you in around three to five days. Give them a try, and see how you get along – and whether or not life without a branch, or telephone banking, fits your needs.