While the Big Four (Barclays, Lloyds, HSBC and RBS) still dominate the UK banking scene, several “challenger” banks have made a real impression in the last few years. And there’s good reason for that too. These UK digital banks can offer some serious benefits to their brick and mortar counterparts, especially when it comes to financial planning and accessing your hard-earned cash overseas. Leaving you with more money to spend on days out in London.

Here, we’re looking at a roundup of some of the UK’s best digital-only banks (in our opinion, anyway).

What is a digital-only bank?

Often known as challenger banks, the growing line-up of digital-only banks started appearing publicly around 2015.

The big downside to digital-only banks (as we’ll see later) is interest on savings, which tends to be on the low side. That said, unless you’ve a big chunk of cash to earn interest on, rates across the board are low enough to be negligible. So there’s a good chance you’ll more than make up for lost interest with a few useful perks.

UK Digital banks tend to have shiny new features the high street banks still don’t, such as:

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  • The best rates on foreign exchanges
  • Free international currency withdrawals
  • 24-hour support
  • Real-time spending notifications on your phone
  • The ability to freeze and unfreeze your cards
  • The option to round up card purchases to the nearest pound and put the rest into a savings pot
  • Spending reports
  • The ability to allocate specific saving pots and spending limits for certain types of purchase

The digital banking apps

For the most part, the apps themselves are intuitive and easy to use. Each digital bank has its own simple interface, which aside from some custom features (which we’ll go into later) are largely comparable. All four of the brands we’re looking at operate on both Android and iOS devices.

Monzo: the best UK digital bank for frequent travellers

Since its arrival, Monzo has been the darling of the London finance world. Back when exclusive codes were required to join, you could hear the Monzo buzz in hushed tones. These days signing up is a little more straightforward (though there are still referral bonuses for signing your friends up).

Monzo has a couple of big strengths. The first is international withdrawals—Monzo lets you pay via debit card anywhere in the world without fees. You can also withdraw up to £200.00 in cash in local currency anywhere without fees per month. After that you’ll be charged 3%. That’s more than N26’s 1.7%, but still falls below the industry average of 2.75—2.99% plus any foreign usage fees (data taken from official websites of HSBC, RBS, Barclays and Lloyds as of Jan 2020).

N26: the most well-established digital bank

Founded in Germany back in 2013, N26 was the first on the market to reach mainstream success. With a huge following in Europe, N26 pioneered several of the features digital-only banks are now well-known for.

Notably, there are no charges when paying by debit card abroad—though there is a 1.7% charge on withdrawing cash. That’s great when you’re in a city where card is accepted everywhere, but requires a little extra thought in a few places where cash is still king. We’re looking at you, Tokyo.

If you travel a lot, you might consider the N26 You scheme, which costs £4.90 per month. This plan allows you to withdraw money in local currency overseas without any additional charges. That means you’ll start saving money if your withdrawals exceed £288.00 per month.

Starling: the best UK digital bank for small businesses

If you’ve managed to get from one Tube station to another without seeing an ad for Starling, congratulations! As the ads suggest, Starling specialises in helping you to spend and save more effectively. That’s mostly done through nifty customisable tools rather than through special interest rates or incentives.

Starling is the only bank we’ve mentioned here that offers interest on savings on current accounts. That’s currently set to 0.5% AER on balances up to £2,000.00 and 0.25% on balances above £2.00 up to £85.00. As of January 2020, some mainstream banks (like HSBC) are offering 2.57% AER. So if you’re dealing with big money, it’s well worth using a Starling account for your daily spending, while transferring a surplus each month to a more competitive savings account.

Starling offers full current accounts, so you’ll have a debit card and all the usual trappings of a bank account. You can also set up a very competitive overdraft, with interest rates of 15–35% based on your credit score starting in February 2020. For context, Natwest, RBS and HSBC are all introducing blanket 39.99% interest rates as of spring 2020, while Barclays will stand at 35%. Depending on your credit score (and how you use your overdraft) that could mean big savings. Add that to a raft of nifty business integrations and customisable reports, a lot of people back Starling as the best bank digital bank for freelancers and small businesses too.

Revolut: the best digital bank for working overseas

Since securing a full banking licence, Revolut enables you to set up a current account in mere minutes. With the best rates by far for international transfers, it’s a great option for if you’re living or earning money abroad and plan to regularly transfer cash back to your home country (or vice-versa). Well-known among digital nomads and the like, Revolut also has some of the best rates for international cash withdrawals—free up to £200.00 per month, 0.2% in fees after that.

Should I switch from a traditional bank to a digital-only bank?

In theory, you could use UK digital banks exclusively. In reality, a lot of users find themselves with a more traditional savings account, supported by a digital bank for everyday spending and budgeting. That has a lot to do with interest rates, as well as credit cards, overdrafts and mortgages—services many of the upstart banks aren’t (yet) providing. There have also been reports that going entirely digital can hurt your credit score, since some challenger banks don’t share your financial data with the nosy folks at Experian and Equifax.

Is my money safe in a digital bank?

With the exception of Revolut, all of the banks we looked into were FSCS protected. So just like a traditional bank account, your money up to £85,000 is protected in case your bank goes under. Of course, if you’ve got that much money lying around, you should probably look into a savings account with a higher interest rate. With Revolut, your money is safeguarded by Barclays. So if Revolut goes under, they’ll pay you back before any other debtors. The main risk here then, would be if Barclays were to become insolvent too. While that seems unlikely, it’s worth bearing in mind.

Comparing UK Digital Banks

BankInterest on savingsInternational transfersOverseas withdrawalsUsing debit card abroadFCS protected?
UK Digital banks n261.57% AER through marketplace partners0.35% in fees1.7% of amount withdrawnFreeYes
BankInterest on savingsInternational transfersOverseas withdrawalsUsing debit card abroadFCS protected?
Starling uk digital banks0.5% AER on current accounts0.4% in feesFree (0.5% markup over weekends)FreeYes
BankInterest on savingsInternational transfersOverseas withdrawalsUsing debit card abroadFCS protected?
UK Digital banks MonzoUp to 1.35% AER through marketplace partners0.35% in feesFree up to £200, 3% thereafterFreeYes
BankInterest on savingsInternational transfersOverseas withdrawalsUsing debit card abroadFCS protected?
REVOLUTNo fees up to £5,000 per month, 0.5% thereafterFree up to £200, 2% thereafterFreeNo

Note: All the figures and information in this article are indicative and correct to the best of our knowledge on the date of publication. We do not endorse any of the financial services discussed in this article. Use all financial services at your own risk.

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