Customers are spoilt for choice when it comes to banking. So much so, it can be confusing to navigate. There are not only many more banks to choose from compared to a decade ago, but also many different types, including the new breed of “challenger bank”, which are mainly digital-based.
Monzo was one of the first digital challenger banks to launch in the UK, hitting the market back in 2015.
Monzo is well known for its “hot coral” payment card and slick banking app, which includes its popular “pots” savings features, budgeting tools and spending notifications.
Its fee-free overseas spending has made Monzo a hit with customers. It‘s also consistently added new features to its app including Monzo Flex, its own buy now, pay later product, and shared tabs, where you can split bills with friends and family.
The bank has branched out into joint accounts, premium current accounts and business accounts, and now has over 10 million customers in the UK.
Revolut opened its virtual doors in 2015. Revolut finally got authorisation to become a UK bank in July 2024, but as yet, it’s not operating as one. This means your cash won’t be protected by the Financial Services Compensation Scheme.
Revolut operates through its mobile banking app and offers 5 tiers of current account – Standard, Plus, Premium, Metal and Ultra. The monthly fees vary, but the more you pay, the more your monthly limits increase on things like free ATM withdrawals. Revolut also offers a kids’ card, Revolut <18 Account, where your child can have their own app and spending card.
In addition, Revolut has a more international reach – it’s available in 48 countries and has more than 50 million customers across the world. It offers fee-free currency transfers in over 35 currencies for UK bank account holders.
Starling followed Monzo and Revolut and went live in 2017. Like its 2 main rivals, Starling’s big draw is its intuitive banking app, through which you can open a bank account.
Its current account is free and offers features such as spending insights, savings goals, cheque imaging, fee-free spending abroad plus an overdraft option.
Starling has expanded into savings and is now offering fixed savings accounts. It also has a business banking offering and a kids’ debit card, Starling Kite.
Monese is a digital banking app and card, which can be opened across Europe, including in the UK. It has the option of adding a Eurozone account alongside your UK account.
In the UK there is the free basic bank account (Simple), and 2 fee-paying ones (Classic and Premium) to choose from. You get the usual debit card with ATM and payment functionality, plus the ability to set up direct debits or foreign money transfers – though the monthly fee you pay determines your free payment limits.
Chase is a relative newcomer to the UK, launching in September 2021. However, it is part of the American banking giant that is JPMorgan Chase.
It has no branch presence in the UK, but it offers all the things you would expect from a digital bank, including 24/7 in-app support, budgeting features, no monthly fees and no charges for using the card abroad. Its main limitation is that you can’t deposit cash or cheques into the account.
Chase offers cashback on debit card spending, interest on current account balances, a linked savings account and interest on savings round-ups.
Zempler offers digital-only current accounts, available to manage through its app or online, and there are a couple of different fee-paying accounts to choose from.
Zempler specialises in offering accounts to customers with bad credit. You get all the standard features of a current account, such as a card, ATM withdrawals, direct debits and overdraft option. But it also aims to help build up your credit score by “lending” the monthly account fee to you, which you then pay back, counting as a timely repayment on your credit file.
A challenger bank is one that’s smaller and newer than a traditional bank. By newer, we mean that most challenger banks were founded after 2009 – so after the 2008 global financial crisis – and the vast majority were established after 2014.
Their plan is to compete with big banks such as HSBC, Lloyds, Barclays and NatWest. By offering cheaper deals, more flexibility, better service or all of the above, challenger banks hope to win over customers.
In a nutshell, challenger banks are trying to squeeze into the market and take opportunities that mainstream banks have been neglecting because of their size, relative market dominance and older technology systems.
It’s important to understand that just because a bank calls itself a “challenger” it doesn’t mean that it’s necessarily better for the consumer. It is true, however, that challenger banks usually bring some advantages.
Traditional banks are now starting to catch up on all of this, which is living proof that more competition means better service for consumers across the whole market.
So, is it all roses with challenger banks? Well, not necessarily. It really depends on your banking needs and preferences. While challenger banks bring many advantages, there are also some notable disadvantages.
Many challenger banks don’t have physical branches, which allows them to save money and offer better deals. This is true for some of the best challenger banks, such as Monzo and Starling Bank. If you bank with either of these, you can do most things through a mobile app.
But there are exceptions: Metro Bank, for example, launched in 2010 as a high-street challenger dedicated to better customer service. At the time, its branches stayed open up to 12 hours a day, but it has since cut back to opening 9.30am to 5pm.
Digital challengers are also coming up with new ways of establishing their physical presence across the UK. For example, Starling and Zempler allow you to deposit cash into your digital account at Post Office branches.
The trick to comparing challenger banks – or any personal finance service – is to know your needs and habits. There isn’t one bank that’s the best fit for everyone, so set your priorities, think about what you want to get out of your bank account and only then compare your options. We’ve put together a list of questions you can ask yourself to kick-start your research.
Once you know all this, you can then compare fees, rates and products knowing exactly what your priorities are to help find the best challenger bank for you. Don’t forget to look at what traditional banks offer as well – they may surprise you.
Many challenger banks have been designed to complement our modern lives, so it’s not a coincidence that they tend to score highly for customer satisfaction.”
It depends on the bank. The first thing to do is to check that the provider you’re looking at is actually a bank. That is to say, whether it has a full banking licence or not. If it does, your deposits will be protected up to £85,000, just as they are in a high-street bank, thanks to the Financial Services Compensation Scheme (FSCS).
If the provider isn’t a bank, it doesn’t mean your money isn’t safe, but it does mean that the level of protection isn’t the same. Always make sure that the provider is regulated by the Financial Conduct Authority (FCA). Many challengers hold an FCA licence to issue electronic money.
Challenger banks know that security is a big concern for their customers, so they usually take great care to ensure that customer data is safe and that apps and cards are well protected. However, if you are going for a digital-only account, it’s good practice to be aware in advance of what happens if you lose your card — can you block it or cancel it directly from the app? What if you lose your phone — would someone be able to access your banking app and your money?
| Brand | Logo | Customers who'd recommend | Review | |
|---|---|---|---|---|
| Chase |  |
100% | Chase stands out amongst the crowded current account market by offering its current account holders 1% cashback (up to £15 a month). | Read our review |
| Revolut |  |
93% | Revolut's Revolut is an app-based banking brand with a range of personal e-money accounts and offers fee-free spending abroad. | Read our review |
| Starling |  |
93% | Starling's easy-to-use app and current account is the perfect way to track your spending habits, and it's also good for travelling abroad. | Read our review |
| Monzo |  |
90% | Popular digital challenger bank Monzo offers app-based current accounts that are packed with useful money tools. | Read our review |
| first direct |  |
90% | Known for its reliability and providing great customer service on the phone 24/7, first direct is loved by customers. | Read our review |
| Bank of Scotland |  |
90% | Bank of Scotland is a subsidiary of the Lloyds banking group that offers solid benefits and a variety of accounts. | Read our review |
| NatWest |  |
89% | With NatWest, is an established bank with good customer service and a network of branches. | Read our review |
| Nationwide |  |
89% | Nationwide offers a wide range of current accounts, some of which come with great incentives and perks. | Read our review |
| HSBC |  |
86% | With HSBC,you get the benefits of a global bank such as security, 24/7 customer service and fraud detection. | Read our review |
| Lloyds Bank |  |
85% | Lloyds comes with the pros of a major UK bank: a network of branches, customer service and top-level security. | Read our review |
| Kroo |  |
83% | Kroo gives a good interest rate on your current account balance as well as fee-free spending abroad. | Read our review |
| Halifax |  |
81% | Halifax has several current account options, ranging from basic accounts up to reward accounts and has a range of services on offer. | Read our review |
| Virgin Money |  |
80% | Virgin Money has developed a comprehensive current account offering, which includes interest on your balance and free overseas card use. | Read our review |
| The Co-operative Bank |  |
80% | With The Co-operative Bank's current accounts, you can get a range of benefits and features while also supporting their ethical approach. | Read our review |
| Barclays |  |
79% | Current accounts by Barclays offers a full range of current accounts with different sets of perks and rewards. | Read our review |
| Santander |  |
78% | High street bank Santander offers a wide range of current accounts, some with cashback and other perks. | Read our review |
| RBS |  |
77% | Royal Bank of Scotland (RBS) offers a selection of current accounts that include cashback at selected retailers and other perks. | Read our review |
| Metro Bank |  |
77% | Metro Bank is all about better customer service and transparency. You don't need an appointment to open a bank account. | Read our review |
| TSB |  |
73% | TSB offers a range of account options, including some specifically geared towards students and young people. | Read our review |
| Monese |  |
67% | Monese is a digital banking app and card using smartphone technology to improve your banking experience. | Read our review |
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