I have a confession to make: I have gone native when it comes to financial technology (fintech). I experimented with a wide array of banking and investing apps for years, but I kept my “legacy”, old-world accounts at the same time. I used to think that fintech apps sounded tremendous – but can suddenly go bust, leaving customers stranded.
Over the last six months, though, I’ve realised that most of the services I use are here to stay, either because the providers are profitable now or because much more significant players are behind the brands. So I have now dumped my legacy accounts and only work with digital platforms.
Best fintech apps for digital banking
I think the following are the leaders in the competitive world of fintech. Let’s start with digital banking apps: first for individuals, and then for small businesses. In digital banking, two main rivals are duking it out: Starling and Monzo – and for me, the winner must be Starling.
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I’ve been with this digital bank for more than five years and rate it highly. It’s a breeze to use, with some excellent features, including “Spaces” – in effect, internal pots where you can stash money. This feature allows you to pay all your monthly bills from one space and then keep your main account for spending on a daily basis.
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Another impressive feature – if you travel to Europe a lot or own property in the EU – is the Euro-denominated current account with very competitive (0.4%) foreign exchange (forex) spreads. One final observation: many customers are wary of the customer service side of digital-only products. There are no branches and most communication is via phone or messaging. Unless you pay for a private bank with proper personal service, in my view, the legacy banks’ customer service is getting worse. By contrast, Starling’s record of in-app messaging is excellent.
Challenger banks offer tough competition
Starling faces tough competition from Monzo and a new challenger with deep pockets: the Chase banking app, from one of the world’s biggest banks, JPMorgan Chase. I also use Chase, and I think it’s a real challenger to Starling for two reasons. First, if you use it for day-to-day card spending, you get 1% cashback on all transactions for the first year – and beyond that first year if you keep putting in £700 a month.
The second big positive is its savings rates. The main Chase saver pays an impressive 5.1% per annum while its roundup account pays 5%. A straightforward strategy is to use the Chase app as the day-to-day card account and as a separate cash savings reserve.
One flaw in this approach is that you only get a 1% interest rate on the current account, which compares poorly with the Starling standard rate (though you do get 1% cashback). If you want an alternative to the big outfits, consider a smaller digital bank. Kroo, for example, is easy to use and pays 4.35% on its current account balances.
Best business bank accounts
Sticking with banking apps, here are the best digital banking services for small businesses. Again, in my view, Starling comes out top, with its range of tools for invoicing and VAT payments, in addition to the always useful mobile cheque deposit service (via a photo on the app) and the option to deposit cash at the Post Office.
The downside of the business side of Starling is that its accounts don’t pay interest, but then, most business bank accounts don’t. Enter Starling’s big rival in business banking, Tide. This digital business bank account is more expensive (if you want lots of features) at £9.99 a month, although you can use the free service, in which case you pay 20p for each transaction.
But Tide is both easy to use and boasts a business saver account paying 4.33%. That rate is eclipsed only by a business banking brand called Allica Bank, which offers term-based business savings accounts that pay from 5.15% for 12 months to 5% for six months. Tide and Allica both boast a superb account opening process – excellent news for business owners used to protracted identification and anti-money laundering background checks.
I will now assess online investment accounts for self-invested personal pensions (Sipps), individual savings accounts (ISAs) and general dealing. Over the years, I’ve used all three leading online brokers: Hargreaves Lansdown (HL), AJ Bell and Interactive Investor, and I keep returning to HL. It’s not the cheapest, but its service levels are consistently high. Offerings start at £11.95 for dealing (up to nine stocks a month), alongside charges that start at 0.45% of assets and go lower if you invest more.
One area where HL has upped its game recently is interest rates paid on cash in dealing and tax-wrapper accounts. Traditionally, online brokers all paid dire rates, but HL now pays above the market average, varying from 3% to 3.7%.
I also rate AJ Bell highly, again for its service and also the cheaper costs: platform charges are 0.25% for a shares account and £5 on share dealing. Interest rates on an ISA vary between 2.5% and 3.5%, and in a dealing account, between 1.95% and 2.45%.
There is a longer list of newer players fighting the big three investment platforms, and I have tried them all. I still deem Freetrade the best of the digital-only platforms, but if you want the best features (ISAs, Sipps or more dealing choices, and better interest rates), it’s not free. The standard service costs £5.99 a month, and the Plus service £11.99. Still, interest rates on cash in the Plus and Standard services are a respective 5% and 3%. If you opt for the free basic service, you will be paid 1%.
Trading 212 has long been another competitor in this area, but it has recently upped its game by launching a free share dealing ISA, with a cash ISA imminent. Its forex fee is a very reasonable 0.15%, a major saving if you deal frequently in US shares.
The Lightyear share dealing app, meanwhile, has impressed me hugely, although it doesn’t offer an ISA or a Sipp. I think Lightyear is the easiest app to use, and its pricing is very competitive. It’s not free (on US shares, the dealing charge is 0.1% up to a maximum of $1 and £1 for UK shares) and the currency conversion is a tad pricier than Trading 212 at 0.35%, but it pays a whopping 4.5% on cash in its UK accounts.
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