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Are we ready for app-only bank accounts? A growing number of firms think so

27 October 2016

11:25 AM

27 October 2016

11:25 AM

Bank staff might no longer recognise your face when you walk into a branch – but a banking app might.

Biometrics (the authentication of your face, voice or fingerprint) are among the futuristic features offered by a new breed of banks which reckon branch networks, call centres and websites are on the way out.

These days it’s all about the app and, in some cases, the app alone.

If you want to grab some of the best savings rates on offer, opening and running your account on your smartphone is your only option. Atom Bank is currently topping the tables for one and two-year fixed rate bonds (at 1.4 per cent and 1.55 per cent respectively) but doesn’t have branches or a website you can log into.

The app-only bank promises ‘the future of banking, available today’.


But Atom isn’t the only bank with a cool slogan and big plans. There are several others throwing around phrases such as ‘digitally-native’, ‘revolution or evolution’ and, the old tech favourite, ‘disruption’. These include Starling, B, Tandem and Monzo – all of which are app-only.

Starling Bank claims to be ‘in synch with you’. The bank received its banking licence in July and is inviting people to sign up on its website to be the first to get the app it claims ‘will replace your current account’. It will have an emphasis on money management and being in control of your cash.

Helping people make smart decisions about their money is a common theme with app-only banks. One of the few digital banks already up and running is sub-editor’s nightmare ‘B’. This is a subsidiary of Clydesdale and Yorkshire banks and was launched back in May.

B offers a current account and savings account which, it reckons, ‘work beautifully together’ within an app. Instead of rates, B focuses on money management. For example, it automatically tags your debit card transactions into categories like food, travel and eating out, and lets you set budgets for each category of spending. Savings can be split into different pots such as ‘holiday’ or ’emergency’.

But the interest rates from B are nothing to write home about. The B instant savings account currently pays 1 per cent AER but it’s cutting the rate to 0.75 per cent from December. The B current account pays 0.5 per cent on balances up to £2,000 but this is being slashed to 0.25 per cent from December too.

Tandem Bank has had a banking licence since last year and aims to launch by the end of 2016. Its initial target audience is ‘older millennials’ aged 28 to 35 who value flexibility with their finances. Tandem has already built a 5,000-strong community of ‘co-founders’ who have a share in the business and help to decide what products are offered.

Rival Monzo was formerly called Mondo but had to change its name due to a trademark dispute. It currently has a restricted banking licence, meaning it can’t yet offer full bank accounts. This will change early next year but until then it can only offer a prepaid Mastercard. It promises to offer travellers the Mastercard exchange rate with no extra fees or charges for using the card abroad – unlike most banks which pile on the fees if you use your card overseas.

Anyone thinking of swapping their traditional bank for an app-only bank should consider a few things first. How safe is your cash for starters – is it covered by the Financial Services Compensation Scheme? What happens if you lose your phone – is there another way of accessing your money or contacting the bank? Does the app work well or will a series of bugs drive you bonkers?

Whether consumers are really ready and willing to trust a bank with only one method of access is open to debate. Only time will tell.

Emma Lunn is a freelance personal finance journalist


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