Earlier this year, Finder reported that 27% of British adults had opened a digital-only bank account, equating to 14 million people. To clarify: these are banks which operate exclusively online. Rather than a bricks-and-mortar high street presence, their accounts work solely through app platforms on phones and tablets instead.
Even before words like ‘lockdown’ and ‘self-isolation’ had become common parlance, many of these relatively new kids on the block were already winning fans – and industry awards – for exemplary customer service. At the beginning of July, for example, Which? revealed challenger bank Starling had the highest customer score of 88% when they surveyed the general public late 2020. And the bank’s big digital rival, Monzo, took second place in the same poll, with a customer score of 82, beating First Direct and Metro Bank to the top spots.
It’s hard to deny the appeal of online-only banking, not least the sheer convenience of having it all in your pocket, wherever you are in the world, and with 24-hour support to boot. Most mobile-only banks also offer improved functions, such as real-time spending notifications direct to your phone, encouraging conscious spending and giving customers a better idea of where their cash goes. There are also budgeting benefits, for example in the opportunity to create specific savings pots or set spending limits on certain purchases.
That said, it’s not all plain sailing for these banks. Just two weeks after winning big with MoneySavingExpert, for example, Monzo’s CEO came out fighting on Twitter to nip ‘fake news’ about the bank’s supposed imminent demise in the bud. Others mobile banks were forced to do the same. For the record, none of these rumours were substantiated. And, just because a bank is new, it doesn’t mean your money’s not safe online. Some, including Monzo, are covered by the Financial Services Compensation Scheme (FSCS), which protects the first £85,000 of your savings.
Rather than being rattled by speculation, most online-only banks have instead showed remarkable leadership and a real commitment to helping customers navigate this difficult time. You only have to look at the wealth of advice contained on their websites – everything from claiming back money on flights or events you can’t attend, to letting vulnerable customers know they can access support.
Before committing to changing bank accounts, make sure you understand exactly what the account offers, its’ fees and check it suits your needs. You may find it helpful to compare online-only bank accounts and check the advantages as well as the disadvantages.
If you want to dip a toe in the water first, you might consider using online-only banks and services in conjunction with your existing account. It’s fairly common for mobile customers to transfer a monthly budget from their traditional bank, and use the app-based one as a budgeting tool and to keep closer tabs on their spending.
Most banks now offer a free seven-day Current Account Switch Service, which is backed by a guarantee that you’ll be refunded any interest and charges on your old and new accounts if anything goes wrong.