Digital banking

Our guide to ‘digital-only’ banks

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Feeling challenged by challenger banks? We’ve put together this handy guide to help you understand everything you need to know about ‘digital-only’, app-based banks.

Woman using mobile phone outside cafe

Ready to compare?

What is a digital-only bank?

A ‘digital-only’ bank is one that has done away with physical branches and managers in favour of intuitive mobile apps that offer a new approach to banking services.

While we know that many still prefer to visit their high street bank branches, there’s a proven audience, largely consisting of millennials, who are interacting regularly with digital-only bank apps.

Digital-only banks are designed to provide a more modular, transparent, and less product-orientated service.

Why use a digital-only bank?

Digital-only banks have the ability to be clearer with their services and allow customers greater control and visibility over their finances. From up-to-the-minute spending updates, to monthly reports and commission-free spending abroad, there are plenty of reasons to use a digital-only bank.

Plus, with these challenger banks making big efforts to stay ahead of the game with innovative features to help you stay on top of your finances, you’ll be the first to benefit from the latest banking innovations.

While we expect traditional bank apps to be upgraded to match digital-only banks in time, the modular nature of digital-only banks means that, in theory, they’re able to stay one step ahead in terms of bringing consumers the features and services that they want.

What do each of the digital-only banks offer that makes them different?

Digital bank feature table

*Listed features are correct at time of writing and subject to change

How do digital-only banking apps compare to a ‘traditional’ banking app?

Each digital-only bank tends to offer their own tweaks to the standard mobile bank app formula, and so digital-only banking apps and traditional banking apps are reasonably comparable in user experience. However, digital-only banks offer the following features:

  • Real-time spending notifications
  • 24/7 in-app support
  • Ability to freeze/unfreeze cards

Digital-only bank app interfaces vary, but each is designed for ease of use with an emphasis on giving clear information. Traditional banks have been attempting to replicate the successes of digital-only bank apps, incorporating elements into their own apps. At present, the user journey of traditional and digital-only banking apps is similar.

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Are they worth switching my main current account to?

Many people open a digital-only bank account to work in tandem with their existing accounts, so it’s not necessarily a case of having one or the other. Some people use digital-only banks as a budgeting tool alongside their existing bank accounts, transferring a monthly budget and using it separately to keep closer tabs on their spending.

You can make payments, receive your salary and set up standing orders, just like a current account from a traditional bank, but with added flexibility and transparency.

How do they compare to standard current accounts?

Digital-only banks are increasingly on par with ‘standard’ current accounts. Aside from the app-first approach, digital banking works day-to-day in exactly the same way that you’re used to: you have physical card, with an account number and sort code so you can spend and request payment in exactly the same way.

What do digital-only banks offer beyond current accounts?

As these banks are relatively young compared to their traditional high street counterparts, each bank typically focuses on a handful of financial products with the view to future growth into areas such as credit cards, mortgages and loans.

Is it safe to save my money with them?

Digital-only banks, just like established banks, have to adhere to banking regulations laid down by by the Financial Conduct Authority and the Prudential Regulation Authority.

All UK-licensed banks belonging to the Financial Services Compensation Scheme, which is backed by the government. This provides that the first £85,000 held in a bank account by an individual customer is guaranteed in the case of that bank’s financial collapse.

What if I lose my phone or card, do I lose my account/money?

Definitely not. You can log into your account from multiple devices, so you can access your account straight away. On some devices, the app can be protected by fingerprint identification/PIN, so you can be sure no one is going to spend your hard-earned money. Otherwise, get in touch with customer support straight away via their 24/7 in-app chat and they’ll be able to help you.

If you lose your card, you can freeze it immediately from your app, so no one can charge payments to it. If your card turns up down the back of the sofa, you can just unfreeze it again.

What happens if something goes wrong – can I phone someone?

While phone numbers are available, the primary form of communication is 24/7 in-app chat. Response times are typically very prompt.

What new services have digital-only banks introduced?

While each digital-only bank is different, and each offers varying services, some of the notable services introduced or championed by digital-only banks include:

  • Real-time spending notifications
  • 24/7 in-app support
  • Free payments abroad
  • Bill splitting
  • Saving pots/jars
  • Monthly spending reports
  • Future spending projections
  • Partnerships with other financial apps

What can we expect in the future from digital-only banks?

The future looks bright for digital-only banks, with many features being added by the various banks. One big innovation being discussed is item-level receipts, so customers can keep an even closer tab on their spending habits. This will mean, for example, that each item you purchase on your weekly shop will be automatically logged on your app, rather than just the total spent.

Also, international money transfers, merchant discounts, investment accounts, joint accounts and under-18 accounts are all on the horizon, bringing them closer in-line with the services of traditional banks.

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