Are app-only banks a good idea?

App-only banks are becoming ever more popular. According to statistics from Finder, almost a quarter (23%) of people in the UK in 2020 use one, and more than one in ten rely on them exclusively. Does this spell the end of traditional brick-and-mortar banks? To find out, let’s weigh up the pros and cons of app-only banks. 



Lower Fees 

The only presence that digital banks have is through your screen – they don’t have branches. Whilst this means you can’t speak to the bank face-to-face, it does have some upsides. Not having to pay rent on property means that challenger banks have fewer overheads and can therefore charge you lower fees. Revolut, the UK’s largest app-only bank, for example, will not charge you to make a purchase in a foreign currency (for most currencies, provided you spend less than £5,000 a month) whilst HSBC charges 2.75% of every transaction


Better interest rates 

Lower overheads also means app-only banks can offer better rates of interest for savings accounts. Monzo, for example, currently offers an annual interest rate of around 0.90% on its savings account – which includes the possibility to withdraw with 24 hours notice. A comparable savings account with NatWest, on the other hand, will only earn you around 0.20–0.30%


Better customer experience 

The online-only challenger banks consistently rank higher than traditional banks for overall customer experience. Whether you’re transferring money, dealing with a lost card, or applying for a loan, app-only banks seem to have customer experience down to a tee. On the review website TrustPilot, RevolutMonzo, and N26 have all scored between 4-4.5 stars out of 5, whilst HSBCNatWest, and Barclays have all achieved a paltry 1.5 stars. 




Fewer services 

The main drawback of app-only banks is that they offer fewer services than their more established counterparts. Whilst they’re great for day-to-day money management, they’re not currently suited to larger financial services such as mortgages and loans. 


No ATMs 

As app-only banks don’t have any physical branches, they don’t have their own ATMs. You can still withdraw cash from other ATMs, though, but there are some limits – Monzo caps cash withdrawals to £5,500 a month whilst Revolut starts to charge 2% on any withdrawals over a monthly threshold of £200



Again, another problem with not having branches is that it can be harder to make cash or cheque deposits to app-only accounts. Some online banks require you to make a transfer from another account, whilst others have systems in place to allow you to pay in. Monzo, for instance, lets you pay in cash or cheques at certain shops through ‘PayPoints’ – it does, however, cost you £1 each time you want to boost your funds. 



Your money is not always protected with app-only banks, meaning that you could lose out if your bank goes bust. As it stands, Monzo and Starling bank are covered up to the value of £85,000 by the UK’s Financial Services Compensation Scheme (FSCS). Any balance held with Revolut is not currently protected. 

App-only banks are on the up. They offer fast, reliable, and accessible services that allow you to keep an eye on your spending habits and build your savings. Whilst they have the upper hand in terms of simplicity and usability, they don’t currently offer the same breadth of services as traditional banks. As always, assess your own wants and needs, weigh up the pros and cons, and base your decision on the outcome. 


If you’d like to improve your financial position, whether that means making the most of your savings, investing in the right places, or securing appropriate insurance, get in contact with IMC Financial Services. With over 20 years of experience, our expert financial advisors will be able to offer you personalised advice to meet all your finance goals. 

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