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.

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What is a digital-only bank?

A digital-only bank is one that provides all its banking facilities online and through app platforms on mobile and tablets. Digital banks have no need for physical branches and their services are provided using automated processes and real-time updates and offering customer support through in-app chat, for example.

While we know that many of us still prefer to visit 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 tend to provide certain features and benefits to their users that are particularly attractive to millennials, for example spending forecasts, alerts and savings pots.

Why use a digital-only bank?

Because digital-only banks are primarily operated through an app, users can have greater control and clearer visibility over their finances.

Up-to-the-minute spending updates, monthly reports, commission-free spending abroad and the ability to instantly freeze and unfreeze cards are just some of the benefits to using a digital-only bank. A digital-only bank may also offer features like bill-splitting, instant PIN changes and even the ability to trade cryptocurrency.

Digital banks and challenger banks are the ones staying ahead of the game with innovative features to help you stay on top of your finances, so it’s likely you’ll be the first to benefit from the latest banking innovations.

What features do each of the digital-only banks have?

Digital banks

How safe are digital-only banks?

The safety of digital banks can be considered in two main ways – access and authentication, and protection by governing bodies.

The benefit of digital banking is that, again, they’re often ahead of the curve when it comes to innovation. This means they will often offer the most hi-tech methods of in-app authentication, rather than - or as well as - using the traditional PIN. This could be:

  • Facial recognition
  • Fingerprint scanning
  • Voice recognition

It could also include iris scanning in the future.

Most digital banks have a rigorous sign-up process and require two methods of authentication as standard, which is considered to be the most secure way to protect yourself online.

When it comes to banking bodies, most people who join a bank will expect it to be Financial Conduct Authority (FCA) approved and protected by the Financial Services Compensation Scheme (FSCS), which protects the first £85,000 of your savings.  

Atom, Monzo and Starling are all FCA approved and FSCS protected, Revolut and Curve are FCA approved but not currently covered by the FSCS.

Why choose an app-based bank over a traditional one?

If face-to-face contact is important to you, then sticking to a traditional, branch-based bank is probably a better option for you. When it comes to banking online, digital-only banking apps and traditional banking apps are reasonably comparable in user experience.

However, digital-only banks tend to 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. Some traditional banks have incorporated some of these elements into their own apps and so, at the moment, the user journey of traditional and digital-only banking apps is similar.

Take a look at what features each digital bank offers, and weigh these up against what your preferred traditional bank offers. It makes sense to choose the bank that brings the most benefits to you and your spending and saving habits.


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Is it worth switching my main current account to a digital bank?

Many people open a digital-only bank account to work alongside 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.

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.

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. It really comes down to what works for you.

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.

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 should be able to 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 UK online-only banks, with new features being added regularly.

Monzo has just announced that it will be teaming up with fintech start-up Flux to introduce item-level receipts, so customers can keep an even closer tab on their spending habits. It is also introducing the option to collect loyalty points on Monzo spending.

For the rest of the online-only banks, 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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