As more and more people make the switch to online banking, the number of online banks* are increasing expeditiously, offering users a host of impressive tools and functions that are revolutionising the way we do our banking.
But with this rise in the number of banking apps and online accounts, how do you choose which of the ones on offer is best for your particular requirements? And is now the time to make the switch completely to an app-only online account?
Also consider: Best Online Business Accounts
* Please note that not all the ‘online banks’ or personal accounts listed in this article have a UK banking licence, and may not be protected through Financial Service Compensation Scheme (FSCS). Please check individual websites for full details.
Revolut
- Sign up and get a £10 top-up
- Get 1 month of Revolut Premium for free
- Exclusive rewards and save as you spend
Suits Me
- App and online accounts
- Set up an account in 10 minutes
- Unlimited £50 refer a friend scheme
Wise
- Open a personal or business bank accounts with Wise
- Authorised and regulated by the Financial Conduct Authority
- Get your own UK account number, Euro IBAN, US routing number, and more…
Curve
- Get £5 FREE with a new Curve Card
- Authorised and regulated by the Financial Conduct Authority
- Travel insurance and rewards available
Cashplus Bank
- A bank account that can build credit history
- Apple iOS and Google Android apps available
- Online banking available
Monzo
- Open a full UK bank account from your phone, for free
- Free international withdrawals and Mastercard exchange rates
- Clear summary of savings accounts and spending
- What is an online bank or mobile bank?
- Which online bank is best?
- Monzo: Best for budgeting / business banking
- Revolut: Best for holidays and international payments
- Atom Bank: Best for loans, mortgages and savings
- Monese: Best for non-UK residents and overseas students
- High street banks vs digital banks
- Is now the time to switch to an app-only bank?
- Online banks FAQs
What is an online bank or mobile bank?
Unlike their high street counterparts, online banks, or app-only banks, seek to provide you with all your banking needs from the confines of an app. They eliminate the need to visit a physical bank as opening and managing an account can be done quickly and securely from your mobile.
You can still access customer support services through live chat, email or phone. All of the best digital banks are free to sign up with, however, you may encounter fees for premium services and products.
If you open a new bank account, you will be in a position to order your debit card with an account number and a sort code, just as you would in traditional high street banks.
Through mobile banking, you will be able to pay bills, make cash withdrawals, transfer money, and set up direct debits the same way you would with traditional banks.
The increase in popularity of mobile app and challenger banks is primarily a result of the United Kingdom government introducing the reforms to create digital open banking. Digital open banking simply means that your bank must provide you with the opportunity to share your personal financial data like bank statements, regular payments and spending habits with other banks or budgeting apps.
Which online bank is best?
I’ve compared the services and products of more than 60 nationally available banks that operate online in order to provide you with the best digital banks for your circumstances.
Monzo: Best for budgeting / business banking
Monzo Bank
For users looking to save money, Monzo is an excellent challenger bank due to its wide range of savings accounts and favourable interest rates.
Monzo became a fully licenced bank in 2017 and therefore offers accounts with all the trappings of more traditional banks including account numbers and sort codes.
Monzo has features and tools including the ability to set up direct debits, loans, and an overdraft facility. Checking whether you are eligible for a loan won’t affect your credit score and you could be approved to borrow up to £15,000. With Monzo, you get a debit card that is easy to manage from within the app.
A nice new feature at Monzo is the Monzo Flex, which allows you to pay later with a pre-agreed credit limit, allowing to you pay for your purchases in 3 monthly instalments at 0% interest or 6 and 12 instalments at 19% AER.
Where Monzo really shines is with their business accounts. Whilst Business Lite is completely free, Business Pro offers advantages such as separate tax pots and integrated accounting with Xero, FreeAgent, or QuickBooks.
- 0.10-1.07% AER
Monzo Bank offers the following accounts to choose:
- Current Account
- Monzo Plus
- Monzo Premium
- Business Account
- Joint Account
- 16-17 Account
- Fixed Term Account
- Cash ISA
- Easy Access ISA
Features of Monzo I like, include:
- Real-time notifications
- Easy energy switching with cashback options of up to £50
- Easy and clear summary of savings accounts and spending
- Accepted worldwide
- Free international withdrawals and Mastercard exchange rates
- No transaction fees on overseas spending
- A member of the Financial Services Compensation Scheme
- £1,000 optional overdrafts
- Set spending budgets
- Freeze card if stolen or lost
- Blends smoothly with Google Pay, Samsung Pay and Apple Pay
- Withdrawals are limited to £400 a day and £5,500 a month
- Interest charged on an overdraft
Revolut: Best for holidays and international payments
Revolut
Revolut are ideally placed for people who travel a lot as they have low fees and favourable exchange rates. From the Revolut mobile app, users can transfer money all over the world, invest in crypto, stocks and commodities, get travel insurance, and exchange money with zero hidden fees.
Opening a Revolut account automatically provides you with an account number and sort code, as well as a host of traditional banking functionality like recurring payments, ATM withdrawals, contactless payments, and Apple and Google Pay.
Whilst Revolut do offer favourable interest rates on their Revolut Plus, Premium or Metal plans, it is worth bearing in mind that these accounts do attract monthly fees.
- Standard Account – 0.15% AER
- Plus Account – 0.4% AER
- Premium Account – 0.5% AER
- Metal Account – 0.65% AER
Revolut offers the following accounts to choose:
- Standard Personal Account
- Plus Personal Account
- Premium Personal Account
- Metal Personal Account
- Business Account
Features of Revolut I like, include:
- Low-cost international transfers in over 30 currencies
- Interbank exchange rate
- A built-in budgeting feature
- Instant spending notifications
- Offers travel insurance
- Lock and unlock the card when it is stolen or lost
- Virtual card and physical contactless card available
- Withdraw cash overseas fee-free (a £200 monthly limit applies as well as a 2% fee above that)
- Not FSCS protected
- Monthly fee for the Plus, Premium and Metal accounts
Atom Bank: Best for loans, mortgages and savings
Atom Bank
Atom Bank managed to secure ‘Best Online Lender’ at the What Mortgage Awards and were the first digital-only bank to obtain a banking licence. If you are looking for a mortgage, or simply after a savings account, they are a great option, however, it is prudent to point out that they don’t have a current account.
If you are a business looking to secure a loan, then Atom is also an excellent choice, with access to secured business loans.
- Instant Saver – 0.5% AER
- Fixed Saver – up to 1.86% AER
Atom Bank offers the following accounts to choose:
- Instant Saver
- Fixed Saver
Features of Atom Bank I like, include:
- Biometric Security
- 24/7 customer care services
- Competitive savings rates
- Quick and easy registration process that only takes ten minutes
- High maximum savings balance of up to £200,000
- Doesn’t offer current accounts
- Only accepts residents from the UK
Monese: Best for non-UK residents and overseas students
Monese
As a registered Electronic Money Institution, Monese offer safe online banking and accounts can be held in GBP or EUR. You can open an account with Monese in just a few minutes, without a credit history and without a UK address making this a favourite option for foreign nationals, ex-pats, freelancers and overseas students.
However, there are some fees at Monese that you should be aware of as these can start to add up.
- You won’t get any interest rates at Monese.
Monese offers the following accounts to choose:
- Personal Instant Account
- Joint Accounts
- Business Account
Features of Monese I like, include:
- Offers a prepaid card that also functions as a debit card
- UK address isn’t required when creating an account
- Allows for spending abroad
- Offers current accounts
- Available to every individual within the European Economic Area
- Accepted across the world
- Withdraw a maximum of £200 fee-free each month from an ATM
- Not a registered financial institution, meaning your cash isn’t FSCS protected
- 2% charge on ATM withdrawals over £200 per month
- 2% exchange fee for international bank transfers to non Monese accounts, and foreign currency card spending
- No overdraft facility
High street banks vs digital banks
The banking industry in the UK is still ruled by the big four banks, which include HSBC, Lloyds, Barclays, and NatWest/Royal Bank of Scotland. However, UK digital banks are becoming highly competitive in this space. New ways of providing financial products and services as well as innovative technology have allowed them to be recognised in the industry.
While many traditional banks are also trying their best to offer online services, the neo and challenger banks are more able to capitalise on the latest technology. They aren’t impacted by clunky IT systems, years-old traditions and historical ways of offering services. As a result of this, they can easily respond to the unique needs and requirements of their customers. Some of the new features and services that digital banks provide as opposed to their high street counterparts are:
- Bill splitting
- Spending reports
- No withdrawal and payment fees abroad
- Instant notifications
- The feature to lock and unlock cards via apps
- 24/7 support services
- Future spending projections
- Spending limits for certain purchases
- In-app account creation and approval within a few minutes
- Specific saving pots
- Robust identity and verification processes
- Limitations for problem spending like online gambling
Advantages and disadvantages of app-only / mobile banks
All types of banks have advantages and disadvantages, and app-only banks are no different. The best part is that the advantages outweigh the disadvantages.
Advantages of app-only banks
- Paperwork isn’t required when opening a bank account
- You can manage everything from the palm of your hand
- A low exchange rate
- Low fees on transactions
- Advanced money management tools and real-time spending notifications
- Lost or stolen cards can be frozen from within the app
Disadvantages of app-only banks
- Only a few app-only banks offer unarranged overdrafts or loans
- Need a smartphone or tablet to use
- Reliant on mobile data or internet connection
- Difficult to deposit cheques and cash
Is now the time to switch to an app-only bank?
The rate at which app-based banks have dominated the banking world is a clear indication of people’s enthusiasm for the potential to make finances easier and more accessible. However, this is still a relatively new concept and requires some consideration before you make the switch in its entirety.
Personally, I like to run my app-only bank, in conjunction with my traditional bank, thus ensuring that I can take advantage of all the features on offer such as favourable overseas transactions and advanced money management tools, but my traditional bank is on hand should I need to deposit cash, pay in a cheque, or access some of the advanced banking facilities like overdrafts and loans which are rarely available with a bank account online.
Whilst there have been several significant advancements with app-only banks, there is yet to be one online bank, that offers all the useful features you might require throughout your lifetime.
Online banks FAQs
Are online banks safe?
What do I need to open a UK digital bank account?
Unlike traditional banks, digital banks have completely streamlined their account opening service and often you will be up and running in a matter of minutes. Whilst you won’t require proof of address, most online bank accounts will require you to take a selfie with your ID and provide your personal details. Proof of ID can include the following: Drivers Licence, UK Passport, EU and EEA National Identity Card.
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