While the Big Four (Barclays, Lloyds, HSBC and RBS) still dominate the UK banking scene, several “challenger” banks and financial services have made a real impression in the last few years. And there’s good reason for that too. These UK digital banks and services can offer some serious benefits against 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 and electronic financial services (in our opinion, anyway) for personal and business use.
What is a digital-only bank or financial app?
Entering the public sphere around 2015, Digital-only banks or financial apps are financial institutions that rely on websites or phone apps to function. You use them to handle your finances and depending on the providor you may also receive a physical card. However, they do not have branches or dedicated ATM’s.
Pros of digital-only banks and financial services:
- Better rates on foreign exchanges
- Free or discounted international currency withdrawals
- 24/7 online support
- Easy to open an account
- Hold multiple currencies
- Real-time banking notifications through apps
- Convenience and speed
- Specialised saving solutions – pots where you can allocate specific funds for savings
Cons of digital only banks and financial services:
- Fewer lending options – no overdraft or loan facility
- Lower/non-existent interest rates on savings
- No physical branches to deposit money/make inquiries
- Funds may not be secured under a scheme such as the Financial Services Compensation Scheme (FSCS)
UK digital banks and services
With that in mind, here’s our list of some of the best digital-only banks and services in the UK. They will usually have their own app or website that is intuitive and easy to use. Most will have a relatively similar interface and similar features.
(Note that these banks are presented in no particular order)
Revolut’s website boasts that you can “open an account in a flash,” and that’s exactly how long it takes to use this financial service. Their emphasis on international functionality makes it an excellent option for expats or frequent travellers for everything from international transfers to receiving your salary.
You can hold money in up to 30 different currencies indefinitely with Revolut, and they also offer healthy international cash withdrawal rates. They’re free for up to £200 monthly, then a 2% fee, although ATM providers may charge a seperate fee.
If savings are what you’re focused on, Revolut’s vaults offer an interesting way to save efficiently, with annual interest paid daily. You can prioritise different funds and save money in up to 31 currencies with varying interest rates. These are all easy enough to monitor with Revolut’s app, giving you on-the-go control over your money.
It’s been a while since Monzo was a practically unknown name and referral codes were spread in hushed whispers. Monzo accounts now take a QR code scan and a few minutes to sign up for. As a comprehensive online bank in its own right, Monzo’s current account comes with all the features of bigger banks – overdrafts, loans, and FSCS protection.
Monzo also has a few strengths that set it apart from its competitors. Its “pot” savings system allows you to easily manage bills and savings immediately through the app. You also have a £200 monthly fee-free withdrawal internationally, with a 3% fee rate afterwards. And if you hate having to use a calculator to split the bill after dinner, their Shared Tabs lets you divide up bills with ease.
Wise (formerly Transferwise), has made a name for itself in the sphere of international transfers for their economical and fast services. Capitalising on their growing popularity, they now offer a multi-currency account and corresponding debit card. Though not a complete current account (you don’t accrue interest or have an overdraft), it might be just the thing if you find yourself on the move often. Providing the ability to send and receive money in multiple currencies, as well as withdraw money around the world, travellers will find it a handy tool. Wise can hold up to 53 different currencies at present.
Wise’s exchange rates are competitive and have relatively low fees. Cash withdrawals are free for up to £200 monthly, followed by a 1.75% fee. You don’t even have to wait for the card if you’re in a hurry – Wise is compatible with Google and Apple Pay.
Since its arrival in 2015, 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 for a bank account is a little more straightforward (though there are still referral bonuses for signing your friends up).
Concerns about account freezing aside, Monzo has a couple of big drawcards. The first is a range of saving pots, where you can earn interest via marketplace partners. The second is easy international transactions—Monzo lets you pay via debit card anywhere in the world. You can also withdraw up to £200 in cash in local currency anywhere without fees per month. After that, you’ll be charged 3%.
Other features include bill splitting (cleverly called “Shared Tabs”) and energy provider switching. The current account can include overdraft and loan facilities, depending on your credit rating.
Note: Monzo have partnered with Wise for smooth international bank transfers.
If you’re looking to save money more efficiently, Starling’s ads promise to help you do just that. Like Monzo, Starling is an online bank that offers the full array of services for your current account – you have access to overdraft and loan facilities based on your credit. These are provided at competitive rates of 15-35% for overdrafts.
If going into your overdraft is exactly what you want to avoid though, Starling do have ways of making good on their promise. Through a variety of tools, such as their instant notifications and spending insights, you can keep an active eye on your money through their app. And for those of us who are on the move, Starling also offers free overseas cash withdrawals and competitive exchange rates – making it a great all-purpose account.
First Direct might not fall cleanly into the realms of challenger banks – they’re a subsidiary of HSBC after all. This means your current account comes with the things you’d expect from a traditional bank. First Direct offers a £250 interest free overdraft, and a relatively high 3.5% AER interest rate on your savings.
This does, however, mean a significant lack of some of the benefits other banks on this list provide. While First Direct does offer a banking app and compatibility with Apple Pay and Google, they are closest to a traditional bank in most other ways. If you’re looking for something close to a traditional current account through a digital bank, this is the place for you.
Looking for something for your business, rather than yourself? ANNA (an acronym for Absolutely No Nonsense Admin), might be the service you need. Aimed at small business owners and sole proprietors, it comes with an array of tools designed to help manage financial affairs. Amongst them are a system to assist with creative invoices, manage receipts, and even handle basic bookkeeping and accounts.
ANNA also comes with some of the appealing extras of personal digital banking. 24/7 support is available, as well as real time spending notifications.
Are you happy with your current account, and just want a secondary account to help with saving? This is where Atom really shines. As the only challenger bank in the UK to be granted a full regulatory license, it comes with the security of FSCS backing, and options on borrowing from personal loans all the way to mortgages.
But it’s in the savings where Atom really stands out. Though they do not offer a current account (you’ll need to link one if you want to withdraw money), their interest rates compare to those of the traditional banks. Fixed saver accounts can have AER’s of up to 4.65%. and your accounts are easy enough to keep an eye on with their app – their main business interface, in fact!
is another digital bank founded in 2015, following a similar path to Revolut and Monzo. Unlike the other two, though, Monese operates in three currencies, the pound, the euro, and the Romanian Leu, limiting your options somewhat. However, for EU travellers, this might be a better option, with no withdrawal fees and a competitive exchange rate.
Monese also offers pots for savings and co-operate with a partner company to offer interest on those savings, even as a digital bank. They also work with finance companies such as Paypal and Avios to integrate your money smoothly. Keep an eye on all of it from the app, and you’ll always be on top of things with Monese.
TreeCard: a UK digital bank that plants trees
Due to launch in 2021, TreeCard is an eco-friendly alternative that provides a wooden debit card, and plants trees as you transact. The company says that 80% of profits will go to reforestation, in a bid to fight climate change. Read more.
N26: UK business closed
Update: N26 has shut down its UK business, and all bank accounts are closed. N26 continues to operate in other markets, however.
Founded in Germany back in 2013, N26 was the first digital bank 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.
Should I switch from a traditional bank to a digital-only bank?
Though you could theoretically do all your banking through digital-only banks, it is currently much more common to have a traditional savings account supplemented by a digital account. This is due to the fact traditional banks still tend to offer better interest rates for savings accounts, as well as many challenger banks not yet offering lending services – credit cards, overdrafts, and mortgages.
There is also a chance that digital-only banking may hurt your credit rating, as some challenger banks don’t share your data with credit rating agencies.
Is my money safe in a UK digital bank?
Of the institutions we’ve looked at, Starling, Monzo, First Direct, and Atom are all covered under the FSCS, meaning that if they were to go under, up to £85.000 of your money would be safe. If you’ve got more than that to hand, you may want to consider multiple traditional savings accounts, as the FSCS limit is per institution.
Revolut safeguards your money through designated banks – so if they go under, you’ll be repaid before any other debtors. ANNA, Monese, and Wise have their own schemes in place too – they use a designated account to safeguard your money, meaning that if they became insolvent, your money would remain untouched. But bear in mind designated accounts/banks aren’t the same level of protection as provided by the FSCS.
Comparing UK digital banks and services
|Provider||Interest on savings||International Transfers||Overseas Withdrawals||Using Debit Card abroad||FSCS Protected?||Lending Facilities?|
|Revolut||Varies by vault||No fees up to £1000 a month, 0.5% thereafter||Free up to £200, 2% thereafter||Free||No||None|
|Wise||No||Varies by currency||Free up to £200, 1.75% thereafter||Free||No (Not a bank)||None|
|Monzo||Up to 1.1% AER through partners||0.35% + fixed fee||Free up to £200, 3% thereafter||Free||Yes||Overdrafts, Loans, Monzo Flex|
|Starling||0.05% AER on current accounts||0.4% + delivery fee||Free||Free||Yes||Overdrafts, Loans|
|First Direct||3.5% AER on Regular Saver account||Variable depending on receiver, + fixed fee||2%||2.75%||Yes||Overdrafts, Credit Cards, Loans, Mortgages|
|Anna||No||£5 per payment||£1 per withdrawal + 1% currency conversion fee||Free||No||None|
|Atom||Up to 4.65% AER with a Fixed Rate Saver||Not permitted||No card given||No card given||Yes||Mortgages, Business Loans|
|Monese||Varies based on pot||Dependant on plan, starts at 2.5% (+1% on weekends)||£1.50 + 2% fee||Free||No||None|
The information provided here is accurate to the best of our knowledge, however this info does not constitute financial advice, and we can’t be held responsible for mistakes or inaccuracies. Always do your own research on top to ensure it’s right for your specific circumstances and consult your financial advisor before choosing any banking or financial products.
This article was first published in February, 2020 by Felix Wilson. Last updated in October, 2022.