Should you join in on the dash for digital banks?
App-based financial-services providers are proving efficient and popular


As high-street bank branches close, older customers are switching to the sector’s digital challengers. Starling Bank has seen a 4.7% rise in sign-ups from over-65s in a year. That age bracket is now its fastest-growing customer group, with 39,000 customers. But the over-65s aren’t alone. Younger customers are leaving the likes of Barclays and Lloyds too. In the first nine months of 2020 Monzo’s customers increased by 39,776 while Starling’s climbed by 39,599.
Those that have made the switch to a digital bank seem happy with their decision. Customers at Monzo and Starling were most likely to recommend their current account, according to a survey last summer by the Competition and Markets Authority (CMA). “For the first time in three years of running the poll the CMA included branchless banks Monzo and Starling, which knocked the previous winner First Direct from the top spot,” says Kate Palmer in The Times.
The app-based banks have plenty to attract new customers. You can manage your accounts easily via apps on your smartphone and you can do things like pay in a cheque via the app rather than having to trek to your nearest branch. Starling’s current account is well reviewed thanks to its 0.05% interest rate and one of the lowest standard overdraft costs of 15% EAR (equivalent annual rate).
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
There are also no fees for spending or making cash withdrawals when you are abroad. Price-comparison site MoneySavingExpert ranks it as the best app-based bank account. Monzo too has no fees for overseas spending, and you can deposit cash into your account via PayPoint, the in-store payment service, for a £1 fee.
Both banks are covered by the Financial Services Compensation Scheme, so up to £85,000 of your money is safe and will be returned to you if the bank goes bust. They are also both members of the Current Account Switch Service (CASS): you should be able to switch your current account across seamlessly in seven days. Digital banks have as good, if not better, security than their high-street counterparts so your account can’t be hacked as long as you don’t share your passwords with anyone. Just make sure you only download official banking apps via your app store and regularly update the app so that it has the latest security features. Also ensure your phone is protected by a pin or another form of screen lock to guard your account.
If you do opt to use a digital bank you can also benefit from not having to enter your password every time you log in. If your smartphone has a fingerprint lock or facial recognition this can be used to log in. Just note that you must have a smartphone to open an account with Starling or Monzo as both are app-based banks.
Ruth Jackson-Kirby is a freelance personal finance journalist with 17 years’ experience, writing about everything from savings and credit cards to pensions, property and pet insurance.
Ruth started her career at MoneyWeek after graduating with an MA from the University of St Andrews, and she continues to contribute regular articles to our personal finance section. After leaving MoneyWeek she went on to become deputy editor of Moneywise before becoming a freelance journalist.
Ruth writes regularly for national publications including The Sunday Times, The Times, The Mail on Sunday and Good Housekeeping among many other titles both online and offline.
-
Lloyds, Halifax and Bank of Scotland to shut another 45 branches
Lloyds Banking Group, which includes Halifax and Bank of Scotland, is set to close a further 45 branches in 2024 - find out if a branch near you is closing.
By Vaishali Varu Published
-
US stock trading app Robinhood launches in the UK
The low-cost trading platform has opened another waiting list for British investors - following two failed attempts to launch in this country - and is hoping to be fully operational next year.
By Ruth Emery Published
-
How to cut the cost of home insurance
Home insurance policies are becoming increasingly expensive, but there are several ways you can keep costs down.
By Ruth Jackson-Kirby Published
-
Are lifestyle funds still fit for purpose?
Lifestyle funds have failed to do what they were supposed to do – shield savers from risk in the run-up to retirement.
By David Prosser Published
-
NatWest-owned Ulster bank boosts easy access savings rate to 5.2%
Rates on easy access savings accounts have hit over 5%, with Ulster Bank now giving savers the chance to earn 5.2% on their cash savings. We have all the details.
By Marc Shoffman Published
-
Moneybox raises market-leading cash ISA to 5%
Savings and investing app MoneyBox has boosted the rate on its cash ISA again, hiking it from 4.75% to 5% making it one of top rates. We have all the details.
By Ruth Emery Published
-
October NS&I Premium Bonds winners - check now to see what you won
NS&I Premium Bonds holders can check now to see if they have won a prize this month. We explain how to check your premium bonds
By Kalpana Fitzpatrick Published
-
October’s NS&I Premium Bond winners revealed - have you scooped £1 million?
Two lucky NS&I Premium Bond winners are now millionaires this October. Find out here you are one of them
By Kalpana Fitzpatrick Published
-
The best packaged bank accounts
Advice Packaged bank accounts can offer great value with useful additional perks – but get it wrong and you could be out of pocket
By Tom Higgins Published
-
Energy bills to fall 7% under new price cap
Energy bills could fall by an average 7% from October under the new Energy Price cap announced today. We explain what the new cap mean for you and when it will come into play
By Pedro Gonçalves Published