What do app-only banks like Monzo offer?

There’s no doubt that the world of banking has seen many changes over the past decade: it’s perhaps hard to believe that September 2017 marked ten years since the collapse of Northern Rock. The global financial crisis and its fallout resulted in many consumers losing faith in the established banking system both in the UK and around the world.

It’s perhaps not surprising therefore that the intervening years have seen alternatives to high street banks emerging, with arguably the most popular of recent years being ‘neobanks’ including Monzo, Atom and Starling. But what does this new kind of bank account actually offer? Is it worth making the switch, or is it merely more of the same wrapped up in a shiny, millennial wrapper?

One thing that certainly sets neobanks apart is how they operate. More often known as app-only banks, they live up to this name with no other way to manage your money than through a smartphone app. It might seem impersonal to those used to doing their banking with a person or even over the phone or a website, but app-only banking has undoubtedly caught the attention of the younger generations who have grown up with smartphone technology. 

A key draw of app-only banks is the way they operate compared to their more established competition. Monzo, for example, offers a number of ways to help its users keep track of what they’re spending. This includes having payments appear on your account immediately after you make them (rather than the delay of at least a few days experienced with traditional bank accounts), real-time alerts and push notifications, and built-in tracking of how much you’re spending in specific areas such as eating out or travel. There are other perks too, such as offering no charges for withdrawing money abroad.

It’s worth bearing in mind that many of these banks are still in their infancy - Monzo technically isn’t a bank yet, currently just offering a money management app with a prepaid Mastercard, but with its banking licence granted earlier this year, it’s only a matter of time. As with many tech startups of the past, there’s every chance that at least some of these app-only banks will disappear before they can truly gain a foothold in the banking marketplace. But with Atom now reporting close to £1 billion in deposits and Starling planning to launch a business banking service at the start of 2018, app-only banking looks increasingly likely to be a long-term addition to the financial world.