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Anumber of new banks are counting on consumers being happy to manage their finances via their smartphone.
But is your money safe with an “app-only” bank?
Such banks offer accounts that are set up and managed solely via an app. (For the uninitiated, an app is a piece of software on a smartphone or tablet that connects users directly to a company without visiting a website.)
The big app-only banks, such as Atom, Starling, Tandem and Monzo, have attracted millions of pounds of savers’ deposits.
Atom Bank is arguably the most recognisable app-only bank. It has been up and running since 2015 and is chaired by Anthony Thomson, co-founder of Metro Bank. It offers fixed-rate savings accounts and mortgages, with current accounts, debit cards, overdrafts and instant access savings all planned for this year.
Atom is one of the first banks to offer biometric security – logging in via face, voice or fingerprint recognition.
But while these futuristic features might appeal to millennials, baby boomers will be more attracted by the table-topping savings rates that Atom offers. It’s likely to be this older generation that is concerned about the security aspects of app-only banking.
“New banks are pushing forward in the savings arena and you shouldn’t be afraid to trust them with your cash,” she said. “As long as their table-topping rates are backed by FSCS protection you can rest assured you’ll get your money back in the unlikely event anything goes wrong.”
The FSCS, the Financial Services Compensation Scheme, protects savers’ money up to £85,000 should the bank go bust.
Money held in Atom’s savings accounts is covered by the FSCS, and the same goes for several of its rivals, including B, Starling and Tandem.
These banks all have British banking licences and are regulated in the same way as high street banks. As well as attracting customers with competitive savings rates, app-only banks are promising a new kind of banking experience that will help people manage their money better.
For example, B (part of Yorkshire and Clydesdale banks) offers a current account and savings account that work together within one app. B’s “projections” feature looks ahead to the end of the month and predicts how much money will be left after you have paid your regular bills.
Like B, Starling and Tandem, which has yet to open fully for business, focus on tools that help customers manage, plan and track their money.
Starling recently made its current account available to customers. The account offers real-time account updates and the Starling card can be used fee-free abroad.
The bank has also announced a deal with Transferwise to give Starling customers direct access from within the app to the firm’s low-cost foreign exchange service.
If you need help, app-only banks usually have traditional call centres as well as the facility to start a web chat from within the app. If you lose your smartphone you’ll need to phone your bank to let it know.
It can help you block payments or set up your banking on a new device. As long as your login details are secure, whoever has your phone should not be able to access your bank accounts.
Atom states that no data is stored on the app or the phone; instead it’s held on the bank’s secure servers.
Another new bank is Monzo, formerly Mondo. It currently offers a prepaid card, but money on the card isn’t protected by the FSCS. A current account with full FSCS protection is due to be launched later this year.
Revolut is another app-only outfit that started life as a prepaid card. Its foreign exchange payment card and app, offering near-wholesale exchange rates, have proved a hit with travellers.
It’s recently added new features that replicate a current account; for example, a sort code and account number. But money held with Revolut isn’t protected by the FSCS.