Smartphone banking: why you should dial into digital banks
Smartphone banking is taking off. And no wonder: it is convenient and comes with features that help you budget and save.
The convenience of smartphone-based banks is proving increasingly popular, while some people have also been prompted to open an account by the offer of fee-free foreign spending. More than 42,300 people switched their current account to Monzo in the first nine months of 2019. The app-only bank has over three million account holders now, while Starling Bank has more than one million. Revolut boasts ten million worldwide.
Digital-only bank accounts are opened and run via your smartphone. There are no branches and very limited websites. Everything is done via apps. Accounts are opened in minutes and come with useful budgeting tools and simple savings options. Most accounts will break down your spending by type so you can see where your money goes each month, which is handy if you are trying to set up a budget and stick to it. Alerts whenever you use your card also help you keep on top of spending.
Topping up savings
Several app-banks also offer round-up savings services: when you spend on your card, the amount is rounded up to the nearest pound and the difference put in a savings account. Monzo will sweep this money into an account from a partner, such as an instant access Paragon account paying 0.91% interest. Starling Bank says its customers save an average £320 a year using its round-up service. This all appeals to younger customers. “Almost half of those born after 1996 – Generation Z – currently have an account with a digital-only bank,” says George Nixon on Thisismoney.co.uk. Other draws include cheap overseas usage. Starling Bank offers fee-free spending and cash withdrawals worldwide, plus 0.5% interest on up to £2,000.
That said, the boom in app-based banks has seen complaints rise too. The numbers remain small relative to these banks’ customer bases, but dispute resolution service Resolver (cited in the Telegraph) notes that some have complained of being frozen out of their accounts or struggling to contact their bank, with Revolut accounting for the lion’s share of complaints in the last 18 months. High-street brands which offer smartphone banking include NatWest’s new digital bank, Bó (fee-free overseas spending and cash withdrawals, plus a ‘Piggy Bank’ savings facility), or Virgin Money’s B (budget alerts, live tracking of spending, and a “sweep” facility – where money from a linked account will be pulled into your current account to avoid going into overdraft).