List of challenger banks and digital only banks
- Starling Bank
- Atom Bank
The days of having to go into your local banking branch, stand in a line and talk to someone are long behind us. First came online banking, available to anyone with a desktop or laptop computer. Now a new wave of baking is upon us: app-based banking.
We’ve rounded up all the information you need to know about app-based banking to give you all the tools you need to discover if this new wave of banking is your personal finance future.
Digital banking is a way to control your money, usually the use of a smartphone app or web app. It allows you to log on to your account anywhere you have internet access, allowing you constant visibility of where your money is going and allowing you to understand the best way to manage it.
There are several advantages to app-based banking:
Another major benefit of app-based banking is the degree to which is has opened up the competitive banking marketplace. Specifically, the new Open Banking regulations have enabled third party apps to innovate off the back of traditional banking’s infrastructure.
Here’s a few things that you may not know about using your mobile as your main point of contact with your bank:
Many banking apps are designed to help their customers save. These apps access your current bank accounts and use clever computer programs to analyse your spending and look for ways that you could save money.
Previously, you could ask your bank to give these apps permission to view your banking data and the bank could refuse. Now, as long as the app is properly licensed, your bank must grant access that you agree to.
App based banking is different to traditional banking in many ways. Unlike traditional banking, app-based banking covers a much wider definition of ‘banking’.
As part of the app-based banking innovations a clear class of banking app has emerged: the challenger banks. Challenger banks are new, fledgling banks that are aiming to take on the big, traditional high street banks and change the way we save and spend money. Challenger banks such as Starling, Tandem and Monzo are similar to traditional banks in that they offer the full current account experience but with all the added benefits of an app-based bank.
One of the most common reasons for people heading away from traditional banks and towards app-based baking is how easy app-based banking makes it for people to save money. Several providers such as Plum and Chip offer automatic savings for customers. Plum’s clever computer program looks at your spending habits and income and identifies how much you can reasonably save each month and then helps you set up a direct debit to your Plum savings account for this same amount.
Another way to use app-based banking to help you save is through the use of prepaid cards. Cards with banking companies such as Pockit, Cashplus and Tuxedo allow you to load specific amounts of money on to your card and even further segregate this money into ‘pots’ to spend on different things. This way you don’t have access to too much money all at once and are less likely to fall for those expensive ‘impulse buys’.
Another popular way to use app-based banking is as a way to save through investment. Apps such as Moneybox allow you to make weekly or one off deposits to three risk-assessed categories of investments. Several of the app-based banks also allow you to sign up to a ’round-up’ where your account rounds up your purchases to the nearest pound and uses the change you would have received as an investment.
App-based banking doesn’t only apply to challenger banks or money saving banking apps, it’s also becoming increasingly possible to bank on your smartphone with traditional banks such as Barclays and Natwest, both of whom have highly rated mobile apps where you an control your money.
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