We take a closer look at two of the “challenger banks” making waves in digital finance: Starling and Monzo.
There are a number of reasons people are turning away from high street banks and towards mobile ones like Monzo and Starling. Many of them act as personal finance assistants, giving you intelligent reports and insights into your spending habits. On top of that, many of these digital banks offer fee free spending abroad, visually appealing graphics and real-time spending notifications. So, there’s no waiting about for contactless payments to show up in your account.
Here we cover two of the biggest players in banking apps, Starling and Monzo.
Starling or Monzo – side by side comparison
|Fees and charges||Free||Free|
|Delivery speed||Between 3-5 working days||Between 2-7 working days|
|Payments||Pay via bank transfer or using PayPal or Google Nearby||Pay via bank transfer or send instantly to other Monzo account|
|UK ATMs||Free, limited to £300 a day||Free, limited to £400 a day|
|Spending insights||Insights lets you compare spending between different merchants||Spending tracker provides a breakown of how much you've spent and where|
|Overdraft||Yes - if you pass 'soft' credit check||Yes - will be charged|
|Categories||10+ categories||10+ categories, regularly updated|
|Direct debits||Yes - future Direct Debits shown as alerts||Yes - future payments shown in homefeed|
|Top up||Via bank transfer, standing order, or have salary paid in||Via bank transfer, standing order, or have salary paid in|
|Freeze your card||Yes: touch of a button in app||Yes: touch of a button in app|
|Alerts||Real time notifications about any account activity. Starling alerts you if you have insufficient funds to cover direct debits.||Monzo's Targets sends notifications to warn if you're spending too fast. Dashboard changes from green to orange to red to indicate overpending.|
|Interest||0.5% AER up to £2,000, 0.25% over £2,000 to £85,000||Marketplace with 8 savings accounts both fixed rate and easy access, £500 minimum deposit.|
|Savings goals||Create different spending goals and protect money from daily spending||Monzo pots let you put money aside, protected from your daily spending|
|Visualisation||The Pulse circle graph shows you how much you have spent each day in real time and on what.||Monzo uses a monthly graph and a pie chart to show the trajectory of your money, and how it is broken down|
|Foreign ATM withdrawals||No ATM fees up to £300 a day.||No ATM fees up to £200 a month. 3% charge over £200.|
|Foreign transactions fee||No fees||No fees|
|Go to site|
Starling CEO Anne Boden explains why Starling Bank is different
Starling vs Monzo: opening an account
- For both, the application process takes less than 5 minutes and doesn’t require any paperwork.
- Download the app on your phone.
- Take a photo of some ID, and enter a name and address, and record a short verification video to prove your identity.
- With Starling, you can start paying for things straight away through Apple Pay and Google Pay. Or, wait 2 or 3 three business days before the card arrives. When it does, you can set up Samsung Pay, Garmin Pay and Fitbit pay too.
- Monzo: you have to wait the 2-7 days for the card to arrive. You can’t start using your account until it does. You can link Monzo to Apple Pay or Google Pay once you’ve got your card too.
Starling Bank: 100% mobile banking
No branches, no fees, no paperwork. Get a smarter kind of bank account with the Best British Bank 2018 – all in under 3 minutes!
Which is the best for going abroad?
Earlier this year, Monzo changed their foreign spending policy, bringing an end to unlimited free ATM use abroad.
Describing unlimited use as unsustainable, there’s now a £200 limit on free cash withdrawals – after which 3% is charged.
Starling’s ATM withdrawal limit is £300 a day, and this applies both at home or abroad. So, Starling might just be better for those looking for a bit of extra cash.
Other than this, they both offer the MasterCard exchange rate, and their options to temporarily freeze your card in your app could just be a life saver abroad.
How do they look on your phone?
Getting an overdraft
Starling and Monzo both offer overdrafts, but if you’re looking to take one out you should consider some key differences. First, you’ll have to pass “soft” credit checks to get an overdraft with either of the banks.
If accepted, you can take out an overdraft as large as £1000 with Monzo. They then charge a 50p flat rate if you go overdrawn by more than £20. So, no matter the size of your overdraft, it will cost you 50 pence.
It sounds simple. However, the downside is that unless you take out a fairly large overdraft, it’s not particularly great value for money.
Starling applies a percentage charge of 15% EAR (Equivalent Annual Rate) instead, meaning a customer who is £200 overdrawn for 14 days will pay £1.08 in overdraft fees. With Monzo you’d be paying £7 for that time.
Monzo gains momentum
- Monzo has now reached 1 million customers in the UK, with 20,000 new users joining every week.
- Customers have spent more than £2 billion through Monzo.
- Roughly 75 percent of its users are under the age of 40.
In terms of their app features, there’s not a whole lot to separate them. Over the summer Monzo added over a dozen features that customers had said they were missing. So, what you can do on their apps is largely the same.
- Budgeting categories: Starling and Monzo automatically place your transactions into categories like groceries or eating out, which you set budgets for. The app reminds you if you’re close to overspending.
- Spending insights: Their apps will give you weekly or monthly reports about which shops or categories you’re spending most on. Spending too much of Pret sandwiches? The app will feed you the numbers.
- How they help you save: Monzo ‘Pots’ and Starling ‘Goals’ let you stash money away for particular goals. A holiday or Christmas present perhaps. Keeping the money out of sight but within reach could help you save.
Ultimately, both apps are free, so you can try them out and see which one feels best to you.
Starling and Monzo interest rates
One major advantage the traditional banks wield over “challenger banks” is they’re typically much better to save with.
In truth, you’ll stay get far better interest rates with older banks and building societies.
Yet, by offering returns on your money, Starling and Monzo have moved ahead of many of the mobile-only banks. Starling give 0.5% interest for your money, while Monzo offer the superior rate of 1%.
Yet, it’s worth bearing in mind you’ll have to put at least £1,000 away in a Monzo put to get this better rate.
Funds held in both banks are covered by the FSCS up to £85,000.
Other app integration
Integrating your bank account with other apps and services is another major boon of digital banking. Starling currently offers more.
Starling and Monzo both let you connect your card with Apple Pay and Google Pay, for instance.
Both apps are now integrated with Yolt, too, so you can access all of your bank and credit accounts in one place. In the app.
Starling in fact offers a marketplace for financial services such as this. You can link Flux to your account, for instance, so you get itemised receipts sent to the app when shopping at certain stores.
In 2018, Monzo rolled out a test version of their Marketplace.Back to top