A surge in digital banking platforms across the UK has shaken our traditional notions of managing money. Once dominated by traditional high street banks, the banking sector in the UK is undergoing a seismic shift, opening the doors to many digital banks.
These establishments are not just subsidiaries or online arms of existing financial giants, but they are often standalone entities built from the ground up to serve a digital-savvy consumer base.
Why the sudden influx? The answer is simple: demand and opportunity. Modern online banking platforms provide a smoother, more intuitive experience than conventional banks.
With features like real-time spending notifications, multi-currency accounts, and low foreign transaction fees, digital banks are redefining what we expect from a bank. These changes challenge traditional banks’ core operations and long-standing practices in banks in the UK.
Now, why is this shift significant? Firstly, digital banks usually have lower operational costs as they don’t have physical branches.
This often translates into better interest rates on savings accounts and lower fees, making them a viable and usually preferable alternative to traditional banks.
Additionally, these financial institutions have adopted tech advancements such as mobile application banking — a game changer that provides user-friendliness and grants customers increased authority over their monetary affairs.
📚Related: Best Banks in the UK
However, as with any financial institution, security is a crucial concern.
This is where the Financial Services Compensation Scheme (FSCS) plays a vital role. The FSCS ensures that online banks are as secure as traditional banks by compensating for deposits up to £85,000 should a financial institution fail.
It’s a safety net that gives consumers peace of mind, making it easier to transition from a high street bank to a digital bank.
[key_takeaways title="A list of the best online banks in the UK"]
- Starling Bank
- Revolut
- Chase
- Monzo
- Monese
- Wise (formerly TransferWise)
- Cashplus
- Pockit
- Curve
[/key_takeaways]
What makes an online bank stand out?
Consumers increasingly look beyond traditional brick-and-mortar establishments and focus on digital banks when choosing a financial service provider.
But what exactly makes a digital bank account so attractive compared to a current account from a traditional bank? Let’s delve into the nuances.
Advantages over traditional bank accounts
First and foremost, the most significant advantage lies in accessibility and convenience. With an online bank account, you’re not tied to business hours.
You can carry out transactions, check account balances, and manage your funds 24/7 from the comfort of your home or while on the go. This real-time access is incredibly liberating, making staying on top of your finances more manageable.
Moreover, online banks usually have fewer overheads, as they don’t operate physical branches.
This saving is often passed onto the customer through lower monthly fees, higher interest rates on savings accounts, and less stringent requirements for maintaining minimum balances.
The absence of physical infrastructure also allows for quicker implementation of new features and services, giving digital banks a competitive edge.
📚Related: What Should I Do With My Savings in the UK?
Features to look for
When evaluating online banks, looking at specific features that cater to your needs is crucial.
Supported currencies
One of the most sought-after options is the range of supported currencies, especially for those who make frequent international transfers.
Holding multiple currencies in a single account or performing currency conversions at low fees can be a significant selling point.
Monthly fees
This is another essential factor. Some digital banks offer fee-free accounts, while others may charge a nominal monthly fee that can be waived if certain conditions are met. Always weigh the costs against the features offered to ensure you get the best deal.
Cash deposits and international transfers
Cash deposits and international transfers are also vital considerations. While online banks excel in electronic transactions, some may lag regarding facilities for depositing physical cash.
Check whether your chosen bank partners with post office branches or offers other deposit options. Look at international transfer fees and exchange rates. You must ensure you’re not losing money.
A well-chosen digital bank account can offer a range of features and conveniences that traditional current accounts often can’t match.
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Best online banks and financial service providers in the UK
In the whirlwind world of modern finance, digital banking platforms have taken centre stage, reshaping the way folks and firms engage with their monetary needs.
While old-school banking establishments struggle to keep up with the swift current of tech advancements, these digital banks have jumped to provide a cocktail of ease-of-use, novelty, and customer-focused services.
Let’s delve into some of the best digital banks in the UK.
1. Starling Bank
Since its inception in 2014, Starling Bank has cemented its position in the digital banking sphere of the UK. This institution, deeply rooted in British financial traditions, has expanded its reach, receiving global recognition.
Their award-winning mobile banking app, real-time payment notifications, and savings goals features illustrate Starling Bank’s commitment to revolutionising the digital banking experience for users.
Main features:
- Personal, business, joint and teen accounts
- Overdrafts and loans
- 24/7 customer service
- £2,000 up to £1,000,000 into a 1-Year Fixed Saver AER 4.48%
Supported currencies: GBP and EUR.
Monthly fee: No monthly fee for personal accounts.
Pros:
- No-fees travel debit card
- Earn interest on current account balances up to £5,000
- Option to send money to 34 countries in 17 currencies
- No monthly fees for personal account
- It does not charge fees for card payments or ATM withdrawals abroad
Cons:
- Fees for business accounts and some services.
- 2% foreign exchange conversion fee.
2. Revolut
Beyond its foundation as a currency exchange application, Revolut has stretched its capabilities to cater to a varied audience.
Catering to over 15 million users, it boasts features such as global spending without hidden fees, instant payment notifications, and international ATM withdrawals.
Furthermore, their expansion into business accounts has empowered SMEs across the UK, solidifying their position as a versatile banking solution.
Main features:
- Currency exchange with low fees
- Cashback
- Business account
- 5 account plans
- Cryptocurrency support
- Stock and commodity investment options
Supported currencies: 36 currencies.
Monthly fee: Plans start from £0 to £45 per month.
Pros:
- Wide range of supported currencies
- Investment options in cryptocurrency
- Low fees on international transfers
Cons:
- No overdraft facilities
- Higher currency conversion costs on weekends
- Lower fees and most benefits are available only for clients with a paid plan
📚Related: Revolut Alternatives
📚Related: Using the Revolut Card Abroad
3. Chase
As the UK extension of JPMorgan Chase, this institution carries a legacy of trust and expertise.
Their digital services in the UK, backed by state-of-the-art technology, provide customers with features like instant transaction alerts, easy bill payments, and financial insights.
Their commitment to integrating innovation with reliability showcases their ambition to lead the UK’s digital banking frontier.
Main features:
- Current and saver accounts
- Rewards and cashback rewards on spending
- High-security measures
- Does foreign currency exchange
- 5% AER (4.89% gross) variable interest
Supported currencies: GBP and USD.
Monthly fee: $12 monthly account fee if none of their options are met.
Pros:
- Strong financial backing from JPMorgan Chase
- Cashback rewards on everyday debit cards and contactless spending
- No fees for spending abroad
Cons:
- Limited product range compared to other banks
- No business accounts are currently offered
- Only supports two main currencies (GPB, USD)
4. Monzo
Monzo, in its short history, has distinguished itself through innovation. It is tailor-made for the modern-day consumer with features like salary sorter, energy switching, and fee-free spending abroad.
Their focus on community engagement, transparent fee structure, and third-party integrations make them stand out in the dense digital banking ecosystem.
Main features:
- Personal, joint, 16-17, and business accounts
- Budgeting tools
- Savings accounts
- Investing
- Overdrafts and loans
- Fee-free spending abroad
- 4 current account plans
Supported currencies: GBP, USD, and EUR.
Monthly fee: Plans start from £0 to £17 per month.
Pros:
- Third-party integrations
- Budgeting and spending insights
- No fees for card spending abroad
Cons:
- Limited business account options
- Does not have a banking licence in most countries
- £1 fee per cash deposit
📚Related: In Search for the Best Monzo Alternative
5. Monese
Understanding the complexities of traditional banking, a Monese mobile-only finance app introduced a simplified onboarding process, making banking accessible.
With a promise of setting up accounts in minutes, they also offer instant transaction notifications, global ATM usage, and lower or no international transaction fees, making them a favourite among expatriates and travellers.
Main features:
- Multi-currency accounts
- Fast international transfers
- Apple Pay and Google Pay support
- Built-in bills and purchase protection
Supported currencies: GBP, EUR and RON.
Monthly fee: Plans start from £0 to £14.95/month
Pros:
- Quick account setup
- Supports multiple currencies
- Flexible personal and business plans
Cons:
- Fees for ATM withdrawals above certain limits
- Limited customer service hours
- Restriction on the amount and frequency of transactions
- Not a bank
6. Wise (formerly TransferWise)
Wise has transformed global transactions, making them faster and more transparent. The real exchange rate of this money transfer operator guarantee and fixed transfer fee showcase their commitment to fair pricing.
With features like batch payments, integration with accounting tools, and a debit card, Wise provides a comprehensive solution for personal and business international transactions.
Main features:
- Real exchange rates for transfers
- Multi-currency account
- Business account
- Low fee on withdrawals after the first £200
Supported currencies: Over 40 currencies.
Monthly fee: No monthly fees.
Pros:
- Low-cost international transfers
- Integration with accounting tools
- Real exchange rates for transfers
Cons:
- No loan products
- Limited customer support
- Not a bank
📚Related: Remitly vs Wise
7. Cashplus
Being in the fray for over a decade, Cashplus is now officially a bank. It will become Zempler Bank later this year. It offers different plans for personal and business customers, with other features and fees.
Their services extend beyond banking, with offerings like overdraft facilities, cash advances, and business expense cards, ensuring holistic financial management.
Cashplus’s focus on entrepreneurs, startups, and freelancers makes them a go-to for professional financial needs.
Main features:
- Overdraft facilities
- Credit builder feature
- Instant online decision
- Purchase protection
- FSCS protection
- 2 account plans
Supported currencies: GBP and EUR.
Monthly fee: £0-£5.95 /month
Pros:
- Overdraft and credit-building features
- Accounting software integration
- Instant account opening
Cons:
- No free account
- Limited supported currencies
- No international money transfers
8. Pockit
Pockit’s emphasis on simplicity has endeared them to a vast user base. Their low-cost structure, no monthly fees, and quick set-up process testify to their commitment to accessible banking.
With cashback rewards on shopping and straightforward bill payments, Pockit ensures banking is uncomplicated and rewarding.
Main features:
- Instant spending notifications
- Direct Debits
- Cashback offers
- Purchase insurance
- Credit builder and personal credit
Supported currencies: GBP only.
Monthly fee: From £0 to £9.99 per month.
Pros:
- Cashback rewards on shopping
- Straightforward bill payments
- Easy account setup
Cons:
- Not a full bank licensed bank
- No international transfers
- Some local and international ATM operators may charge their withdrawal fees
9. Curve
Curve’s innovative approach to banking is encapsulated in its ability to merge multiple accounts into a singular platform.
With features like ‘Go Back in Time’, which allows users to switch payments between cards retroactively, and cashback, Curve reimagines how we perceive and use our financial tools.
Their emphasis on security, with real-time alerts and in-app card lock, ensures peace of mind for users.
Main features:
- One card for all accounts
- Zero foreign exchange fees
- Instant spending insights
- Up to 20% cashback
- Smart Rules
- Fee-free FX
Supported currencies: Multi-currency support.
Monthly fee: From £0 to £17.99 per month.
Pros:
- The “Go Back in Time” feature allows users to switch payments between cards retroactively
- Cashback
- Emphasis on security, with real-time alerts and in-app card lock
- Simple interface.
Cons:
- Not a standalone bank
- Most features are for premium account users
- Limited customer support
[note title="Note"]
All information provided is dated 23 April 2024 and may have been updated since. Please check each platform’s official website for the latest information.
[/note]
Types of online bank accounts
When managing your finances, one size doesn’t fit all. Online-only banks in the UK offer a variety of account types, each tailored to meet specific needs and lifestyles.
Whether you’re an entrepreneur, part of a couple, or simply someone looking to make the most of your money, a digital bank account is likely right for you.
Current Account
A current account is the backbone of everyday banking, enabling you to receive your salary, pay bills, and make purchases.
Most online banks offer current accounts equipped with a debit card, online banking features, and, sometimes, an overdraft facility.
The significant advantage of an online account is its convenience, as you can access it anytime, anywhere, from your smartphone.
Savings Account
For those looking to set aside some funds for the future, a savings account is an attractive option.
Online savings accounts often offer higher interest rates than traditional high-street banks. Building a nest egg is easier than ever with features like automated saving rules.
Joint Account
Joint accounts help manage shared expenses, commonly utilised by couples, housemates, or family members.
Most digital banks offer the option to open a joint current account, complete with individual debit cards and shared online access. These accounts often come with budgeting tools to track everyday expenditures, making it simple to manage household finances.
Business Accounts
If you’re a freelancer or run a small business, an online business account can provide specialised services tailored to commercial needs.
These can range from invoicing solutions and multi-currency accounts to integrations with accounting software. Some even offer expense management features, making it easier to keep track of business-related spending.
Personal Accounts
Beyond current and savings accounts, some digital banks offer ‘personal accounts’ — a term that often refers to an account with features designed for individualised financial management.
These might include spending insights, saving goals, and even investment options.
How to open an online bank account: A step-by-step guide
Opening digital bank accounts in the UK is generally straightforward, but knowing what to expect is crucial. Below is a step-by-step guide to help you navigate through the various stages of account opening.
Step 1: Research and choose the right bank
The first step is to decide which online bank suits your needs best. Consider factors like monthly fees, supported currencies, and additional features. Once chosen, go to the bank’s website or mobile app to start the application process.
Step 2: Complete the online application
You’ll be prompted to fill in personal information such as your full name, date of birth, contact details, and address. Some banks may also ask for employment details and your expected account activity.
Step 3: Verification and identification requirements
You’ll need to prove your identity for security and compliance with UK laws. This often involves uploading a photo of your passport or driver’s license and a selfie for facial recognition.
Some banks may also require proof of address, such as a utility bill or bank statement.
Step 4: Credit check and approval
Many digital banks will perform a soft credit check as part of the application process. This won’t impact your credit score but helps the bank assess your financial behaviour.
Upon successful verification and credit check, your account will be approved.
Step 5: Account setup
Once approved, you’ll receive your account details, including your sort code and account number. You can then set up direct debits, standing orders, and fund transfers.
Step 6: Receive debit card
Your debit card will usually be mailed to your registered address within 3 to 5 business days. After activation, you’ll be all set to use your new online bank account.
Following these steps, you can open an online bank account from your home with minimal hassle.
Fee structure: What to expect from online banks
Understanding the fee structure is crucial when choosing an online bank, as costs can quickly increase if you’re not careful. Here’s a breakdown of some standard fees you might encounter.
Monthly fees
Most online-only banks in the UK offer no monthly fees, but some premium or business accounts come with a monthly charge. This fee generally ranges from £5 to £15 and often includes added perks like travel insurance or higher withdrawal limits.
Transaction fees
Standard transactions like direct debits, standing orders, and local transfers are usually free of charge. However, some banks charge fees for services like international transfers or expedited payments. Be sure to read the fine print to avoid any unexpected costs.
Foreign transaction fees
This is essential to consider if you frequently travel or make payments in foreign currencies. Many online-only banks offer fee-free foreign currency transactions, but some may charge a small percentage for conversion or international transfers.
Hidden fees
While UK online banks are generally transparent about their costs, knowing hidden fees is essential. These could include charges for overdrafts, paper statements, or closing an account. Always read the terms and conditions and look out for the small print.
Knowing the fee structure can help you decide when selecting an online bank. Always review the charges associated with the services you intend to use most frequently to ensure you get the best deal.
Additional features: Beyond basic banking services
When it comes to choosing an online bank, sometimes it’s the additional features that can make all the difference.
Beyond the usual current accounts and savings options, many digital banks offer services that make your banking experience more convenient and integrated into your lifestyle.
Google Pay and Apple Pay
The ability to link your digital bank account with mobile payment platforms like Google Pay and Apple Pay is a standard feature now.
These services allow you to make contactless payments straight from your phone, making transactions quicker and more convenient.
Direct debits
Setting up direct debits is another feature that most online banks offer. Direct debits are not just a way to pay your bills automatically, but they often also come with discounts from service providers.
For instance, you might get a reduced electricity or internet bill rate if you set up a direct debit.
Choosing the perfect digital banking platform can indeed hinge on these extra functionalities. They offer an extra convenience layer and can save you money in the long run.
Before opening an account, consider how you intend to use it and whether these additional features will benefit you.
The best online bank for your needs in the UK
Digital banking platforms have profoundly revolutionised the traditional dynamics of the financial sector. These digital-first institutions are increasingly setting the standard for what consumers expect from their banking experiences.
From multi-currency support to zero-fee transactions and state-of-the-art mobile apps, the best digital banks in the UK offer robust features that cater to a diverse range of needs.
In everyday banking, a digital bank provides a seamless experience that integrates with our increasingly online lives. The benefits are not just in the form of convenience but also cost savings.
Many online banks offer competitive or even zero monthly fees, transparent pricing structures, and lower foreign transaction fees than their high-street counterparts.
If savings are your primary concern, look for banks that offer high-interest savings accounts.
In contrast, those interested in investments might find a more suitable digital bank with robust trading platforms. Your specific needs will dictate which bank offers the best package for you.
However, it’s essential to understand that many online banks are not, in fact, officially recognised as banks in the traditional sense.
Consequently, they might not be covered under the Financial Services Compensation Scheme (FSCS), which compensates for deposits up to £85,000 if a financial institution fails.
When considering an online financial service, always check its regulatory status and the protections in place to ensure your money is secure.
Digital banking is a sturdy and versatile substitute for conventional banking institutions. The level of convenience and the broad range of services make them an excellent choice for the modern consumer.
Whether you are looking just for a bank to handle your everyday transactions or a versatile platform for your savings and investment needs, an online bank is likely right for you in the competitive UK market.
Frequently Asked Questions
How secure are online banks compared to traditional banks?
Both online and traditional banks prioritise the security of their customers’ data and funds. Given their digital-first nature, online banks often employ advanced encryption techniques, multi-factor authentication, and regular cybersecurity audits to ensure the utmost safety.
While traditional banks also use these measures, they have physical branches prone to conventional security threats. It is essential for users always to use strong, unique passwords and enable all available security measures, regardless of the banking platform.
Are there fees associated with using online banking services?
Fees vary widely among online banks. Many online banks offer fee-free basic accounts, capitalising on their lower operational costs due to the absence of physical branches.
However, some may charge for premium services, international transactions, or specific account types. It is crucial to review the fee structure of any bank before opening an account.
Often, the transparency and straightforwardness of fee structures are advantages of online banks over their traditional counterparts.
Can I access online banking services from outside the UK?
Yes, most online banks in the UK provide services that are accessible globally, making them ideal for frequent travellers or those living abroad.
With mobile apps and web platforms, customers can access their accounts, make transactions, and manage their finances from almost anywhere in the world.
However, it’s always advisable to check with the specific bank regarding any regional restrictions or additional fees for international usage.
How do online banks handle customer service without physical branches?
Online banks have adapted to offer robust customer service through various digital channels. Most have 24/7 customer support via live chat, email, and phone. Some also provide video calls or utilise AI-powered chatbots to answer common queries instantly.
The absence of physical branches doesn’t hinder their ability to serve customers; many users find digital-first support more efficient and convenient than traditional methods.
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