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Online-only banks

Should I get an app-based bank account? 

Victoria Russell
Written by  Victoria Russell
5 min read
Updated: 25 Mar 2024

As the world becomes increasingly digital, so has the way we bank. Our guide to online-only banks in the UK tells you everything you need to know

What is an online-only bank?

Online-only banks are a product of the internet age, providing a platform where all account management is handled through user-friendly apps or websites.

This shift towards digital banking has been gaining popularity, but it's not without its considerations.

The absence of physical branches signifies a major change in customer service and the way banking services are accessed.

Woman using mobile phone outside cafe

What to consider before going digital

Before you leap into the world of online banking, it's important to weigh several factors:

  • Face-to-face interaction: With no branches, you won't have the option for in-person service, which can be a deal-breaker for those who prefer a personal touch.

  • Service range: Online banks often focus on checking and savings accounts and may not offer the full spectrum of services found at traditional banks.

  • Cash transactions: If you frequently deal with cash, the inability to make direct cash deposits could be a significant inconvenience.

Opening an app-based bank account

If you decide to go digital, the account opening process is straightforward:

  1. Download the app: Begin by installing the bank's app on your smartphone.

  2. Enter Your details: You'll need to provide some personal and financial information.

  3. Identity verification: Prepare to verify your identity with documents and possibly a video confirmation step.

  4. Card activation: Once you receive and activate your card, you're all set to start using your new account.

The safety of virtual banks

When it comes to security, online banks are not skimping. They often employ two-factor authentication and biometrics to ensure your account stays secure.

However, it's crucial to note that not all online banks are regulated by the Financial Conduct Authority (FCA) or covered by the Financial Services Compensation Scheme (FSCS), which could affect the safety of your savings.

Most communication is secured within the app, adding an extra layer of protection.

Weighing the Pros and Cons

Like any financial decision, choosing an online-only bank comes with its share of advantages and disadvantages:

  • Advantages:

    • Utilize saving pots or jars for more effective budgeting

    • Free or lower-cost transactions when traveling abroad

    • Access innovative budgeting tools and saving pots

    • Benefit from 24/7 customer support and convenient bill-splitting features

  • Disadvantages:

    • The lack of a branch network could be a drawback for some

    • Your savings may not be protected under the FSCS

    • You might find the range of banking services more limited than what traditional banks offer

Choosing the best online-only bank for you

Selecting the right online bank depends on your financial habits and needs.

Whether you're looking for low-cost international transfers, FSCS protection, or attractive switching incentives, comparing the features of different digital banks is essential.

Take a look at the table below and we'll lay bare what features you can expect from the main operators:

Table showcasing the different features of digital banks

To switch or not to switch?

Switching is made easy with services like Monzo and Starling, which support the Current Account Switch Service.

Online-only banks can serve as excellent supplementary tools for budgeting alongside your existing accounts, especially for budgeting and saving.

They offer many of the same functionalities as traditional accounts, including debit cards and account numbers.

Will you get a physical card?

The provision of a physical card varies by bank. Some, like Monzo, offer a debit card as standard, while others may operate entirely virtually.

Online-only vs traditional current accounts

Ultimately, the choice between online-only and traditional accounts boils down to personal preference.

It's entirely feasible to maintain both types of accounts to enjoy a wider array of benefits.

Tech-savvy individuals may gravitate towards online-only banks for their innovative features and low fees on foreign transactions.

However, maintaining both types of accounts could provide a broader range of benefits.

Other useful guides

For those looking to expand their banking knowledge, additional resources on current accounts, basic bank accounts, and bank fraud can be incredibly helpful.

Compare current accounts with MoneySuperMarket

MoneySuperMarket provides a comprehensive platform to compare current accounts from UK providers, showcasing features like overdraft rates and customer service.

You can apply directly through the website, streamlining the process of finding the best account for your needs.

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