July 4, 2021

best digital banks in the uk, image shows man with phone looking at digital banks


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It is no secret that the best digital banks in the UK are online. With so many options available, it can be challenging to choose which one best suits your needs. This post will help you make an informed decision about where to open your account by comparing 5 of the digital banks in the UK and discussing what they offer.


The best digital banks at a glance

Our Top Picks

#1

5/5

Starling Bank 

An award-winning app-based current account that you can open in a couple of minutes. Free to open and gives you lots of features to help you automatically save.  With no fees for spending or ATM withdrawals abroad it's a must-have for overseas travel. 

Minimum monthly pay-in: None

In-credit interest: 0.05% AER variable on up to £85,000

Overseas fees: None

FSCS savings protection? Yes

#2

4.5/5

Monzo 

Another great savings card and no fees for spending abroad. Both fee accounts and premium accounts offered but to get all the features of our number 1 top pick you have to pay a bit extra. 

No interest available on a free account but it does benefit from cool features like bill splitting.

Minimum monthly pay-in: None

In-credit interest: None

Overseas fees: No spending fees cash machine withdrawals vary

FSCS savings protection? Yes

 

Monzo rated digital bank

#3

3.5/5

Atom (savings only)

Set up easy saving account and link your existing current account to Atom. You will have access to your savings 24/7. This option is for savings only.

Minimum monthly pay-in: None

In-credit interest: from 0.10% APY

Overseas fees: N/A

FSCS savings protection? Yes

atom bank uk digital bank

#4

3.5/5

Revolut

Revolut is a digital-only bank it has an app that lets you spend your money abroad without any fuss. Packed with featured the major drawback is that Revolut doesn't have a UK banking license 

Minimum monthly pay-in: None

In-credit interest: from 0.35%

Overseas fees: N/A

FSCS savings protection? No

Revolut uk banking

#5

3.5/5

Lloyds Bank 

Representing the Traditional banks Lloyds has done a great job in updating its app to include a spare change round up feature to help customer save with every spend. 

Minimum monthly pay-in: None

In-credit interest: varies

Overseas fees: N/A

FSCS savings protection? No


Lloyds Bank digital banking


What is digital banking?

what is digital banking


Digital is a form of banking conducted online primarily via your phone, tablet, or computer.

The notion that technology has made our lives easier generally still holds when it comes to digital banking as well. Convenience is the most significant benefit of digital banks.

You don't need to visit their bricks-and-mortar bank branch anymore if you want to deposit or withdraw money, make payments, or schedule transfers.

For example, you can do these things from the comfort of your own homes using just a secure internet connection and your smartphones.

Digital banks have also offered new services like customised loans with more favourable interest rates based on each customer's credit profile and debit card purchase histories.

Plus, people who work irregular hours can log in at their leisure, and with some digital banks offering 24/7 customer support, it is a service that revolves around your life. 


Why should I choose an online bank over a traditional bank?

Why should I choose an online bank over a traditional bank? what is best digital bank

The most significant advantage online banks have over traditional brick-and-mortar banks is transacting from your own home.

This freedom allows you the chance to complete transactions at whatever time and on whatever device suits you best. That can be more difficult with high street banks when time is not on your side.

Online banking also provides a more convenient way to deal with financial matters in terms of direct deposit, paying bills, and other types of transactions that would have been done with a paper cheque or cash in the past.

You will also find that there are fewer fees associated with this type of banking. Whether it's a monthly fee for owning an account or additional charges abroad, online banks often offer these services without any cost whatsoever.

Check out the video below to see why there has been such a rise in challenger banks:

Traditional vs digital banks

traditional banks vs online banks


UK banks are currently dominated by the “big four” banks (RBS, Barclays, HSBC and Lloyds). The challenger and neo banks are more agile and more. They are not weighed down by years-old traditions, clunky IT systems and historical ‘ways of doing things.

Digital banking is the most popular form of money management for people in Europe today, with 84% pursue digital bank regularly.

However, before you switch to a digital bank, there are some things to consider:

  • Which type of account will best suit your needs? A savings account or checking account both offer different benefits.
  • Do you want your money to be safe? Then make sure you pick an FCSC protected
  • Do you need to speak to someone in person? Digital means digital

Digital banking: Jargon & need-to-knows

digital banking what you need to know


You might be hesitant about stepping into digital banking and worrying about things like FSCS protection, i.e. is my money safe?

Also, how do you make cash deposits without a physical branch?

All excellent questions, here is what you need to know:

  • Post Office: That's how you deposit cash with most of the banks listed in this article. 
  • Bank App: Your replacement to a physical where you will spend your time understanding your habits.
  • Interest rates: you still get them with the majority listed.
  • Financial services compensation scheme: The majority of digital banks are FSCS protected, which means that your money up to £85,000 is protected in case your bank goes under.
  • Challenger banks: Challenger banks are financial institutions that often start small and act as an alternative to high street banking. They can grow quickly and don't struggle to implement changes due to their smaller size. Meaning the customer can often benefit from their agility.
  • Saving money is more straightforward: The apps are innovative and show you quickly where you are parting with your cash. Meaning you can easily make changes to save money. Some apps even have spare change round up to help you save with every spend you make.
  • Saving accounts: These are often tied into your existing current accounts, meaning less paperwork and reducing the need to set up multiple current accounts.
  • ATM withdrawals: Happen the same way, insert your card, and you can make cash withdrawals as you usually would. 
  • Spending notifications: A pop up that will appear on your phone every time money is deposited or withdrawn from your account. 

Benefits of digital banks

shows benefits of digital banks including easy spending reports, saving Money, customer support, real time notifications


Wondering what the benefits of digital banking are over your high street banks?

Digital banking has many benefits that we've touched on in this post, but one of the best is just how quick and easy it can make your life.

  • Real-time notifications: Service providers will often send messages telling you of transactions and balances so that even if you don't log in to your account for days, there's no risk of forgetting about the work piling up or getting hit with a late payment fee.
  • App-based: All of the best digital banks in the UK are app-based. This means that you can access your account and make transactions at any time, from anywhere on earth, with an internet connection!
  • Security: Your money is kept safe by encryption which helps to protect against fraudsters trying to obtain sensitive information like banking passwords or credit card numbers. Plus it
  • Convenience: Banking online means never having to queue up at a bank branch again; with digital banks, you can do everything from paying bills to getting loans or even sending money internationally without needing to leave your home
  • Spending habits: Many digital banks have great apps meaning it's easier to learn about your spending habits to change them to save more money.
  • Spending reports: easy access to spending reports to learn more about your habits.
  • Round up spare change: automatically save with each transaction.
  • A closer look at the best digital banks

    Want a more detailed look at which banks offer what? Here is our list in more detail. 

    1) Starling Bank account: Our Best of the digital banks

    starling bank best digital bank
    • Free to use and sign up
    • Has a banking licence and is regulated by the financial conduct authority
    • Interest rate given
    • Perfect for Travel: Free cash withdrawals abroad and 0% exchange fees
    • Easy to save: round up feature (up to x10!)
    • Easy to see upcoming Direct debits with app
    • Marketplace integration to link other apps to your account 
    • Easy to deposit cash at Post Office

    5/5

    Trying to save money?


    A digital-only bank that offers instant notifications, categorised spending insights, and 24/7 UK support. You can do everything you used to do in a branch on your phone - from opening an account to paying bills.

    And now, with Spaces, it's even easier for you to put money aside in virtual piggy banks or round up transactions automatically so you can save the change.

    You'll never have trouble saving again with Spaces! It’s easy for anyone to set up their own savings goals and watch their balance grow over time without having to worry about forgetting what they saved for or how much they've saved. Plus, there are no fees associated with using Spaces – only interest earned on your savings when funds are not withdrawn. 

    Read Full Starling Bank Review

    Customer Service

    Cost

    App Features

    2) Monzo

    Best for bill splitting

    Monzo digital bank
    • Free to use and sign up
    • Has a banking licence and is regulated by the financial conduct authority
    • Interest given, but only on premium accounts starting at £5 a month
    • Perfect for Travel: Free cash withdrawals abroad and 0% exchange fees
    • Arranged overdraft available
    • Credit score available, but you have to pay £5 a month
    • Real time notifications
    • Easy to deposit cash at Post Office

    4.5/5

    Bank Transfers are so easy

    A UK bank account that offers savings, borrowing and overdrafts. You can also send money for free to any UK bank. 

    Pots allow you to separate your money and see where it's going with instant notifications. Spend using Apple Pay or Google Pay with spending categories so you can track your spending better.

    You won't have to worry about paying fees when transferring funds or overdrawing because the FSCS protects eligible deposits up to £85,000 per person!

    Also offering cool features like payment links and bill splitting bank transfers from other accounts have never been easier!

    The main drawbacks to this account is that you need to pay for the account if you want to unlock advanced features, however you do benefit from a cool card by doing so. 

    Related article: Starling V Monzo


    Customer Service

    Cost

    App Features

    3) Atom bank

    Best for savings accounts 

    atom bank
    • Free to use and sign up
    • Has a banking licence and is regulated by the financial conduct authority
    • No need to set up a current account as this is for savings and mortgages. 
    • low fees for mortgages
    • Set up standing orders to Pay into savings account

    3.5/5

    Just for savings not bank account

    Atom Bank is a growing challenger bank with savings, loans and mortgages. 

    Founded in 2014, the idea was to shake up an established industry and appeal to 'millennials' by offering personalised services.

    The big difference with this is you do not get a card it is a savings app and nothing more you must connect your current account. 


    Customer Service

    Cost

    App Features

    4) Revolut

    Best for cryptocurrency

    Revolut
    • Free to use and sign up
    • No UK bank license 
    • Ability to set up spending limits on business cards 
    • Get salary day early
    • Great for travel 

    3.5/5

    Revolut is a fintech app that combines travelling money, fee free-spending and global transfers to over 60+ countries.

    Revolut supports 29 cryptocurrencies, as well as gold certificates and commodity exchanges, meaning you can travel without worrying about market volatility. You won't have fees or have to pay expensive forex fees on in-store purchases either!

    You can open an account in 60 seconds and get their best exchange rates straight away. You'll also be able to enjoy the best global banking service that has no monthly subscription fees, forex spreads or hidden charges!


    Customer Service

    Cost

    App Features

    5) Lloyds Bank Best of the traditional banks

    Lloyds Bank
    • Free to use and sign up
    • FSCS protected
    • One of the traditional banks so you can go in and speak to someone in person
    • Savings accounts offered
    • Credit cards available
    • Lloyds banks offer more than just a current account i.e Mortgages 

    3.5/5

    Lloyds Bank is the UK's oldest surviving bank, with a longstanding heritage of providing financial services in times of stability and difficulty. It has been on a long-standing course to restore its fortunes since taxpayer assistance during the banking crisis and operates 1,400 branches nationwide.

    Although traditional banks like Lloyds has still kept up with the likes of the challenger banks by offering a Save the Change app.

    Lloyds Bank Save the Change is an app that lets you round up everyday purchases and put the change towards something meaningful. It's free, it's easy, and it helps you save more every month.

    Get started today by downloading Lloyds Bank Save the Change from Google Play or App Store.


    Customer Service

    Cost

    App Features

    Which is the best digital bank in the UK?

    Which is the best digital bank in the UK

    Each of the current accounts listed in this article has its pros and cons, and of course, it really depends on you, the user, to which of the bank accounts is best for you.

    Weighing up the pros and cons of each bank will help you best decide which one is best for you.

    Suppose you would like to use your card for travel and benefit from Starling, Revolut and Monzo. In this review for me, the account with the majority of features for no extra cost is Starling.

    Whereas with other accounts, you need to pay extra to unlock features advanced round up to the nearest pound (up to 10x), interest on balance as standard, spending notifications, bill splitting, 0% exchange fees and withdrawals abroad all included for free. It's also worth noting that they are also FSCS protected.

    Digital bank Monzo on the other hand, although very close in account features charge now a £5 a month premium for some of the above. 

    What bank has the best online banking?

    best online banking


    A bank you can't live without.

    Although Monzo is still relatively new. It operates purely through digital transfers and mobile apps (although there are plans to open banking branches). It has an app with clever features like spending tracking tools and bill splitting.

    The idea behind Starling is that its banking platform will be an entirely free service, whereas most banks charge £1 each time you withdraw cash abroad or anywhere between £10-20 for international debit card use.

    It's hard to make a definitive decision, but I would say that Starling is the better of the two because it is free and packed with useful features that help you save money. 

    Best Digital Bank for small business

    Starling bank busines


    Many digital banks cater to small businesses, but one of the best is Starling. It has features like money safe and global transfers for no cost. You can also open an account in 60 seconds with instant access to their best exchange rates straight away. No monthly subscription fees or hidden charges either!

    Read full Starling business review to find out more

    Summary of the UK's digital banks

    A few UK-based digital banks have made their way to the top, but it’s hard to make a definitive decision. That being said, Monzo is one of the popular ones with no monthly fees and free international debit card use. But you must pay for premium features.

    For a completely free account, Starling Bank gives you instant notifications on your phone when you spend throughout your day.

    This can help curb impulsive spending or save money by categorising transactions into different areas like groceries versus entertainment expenses. 

    Hence, you know how much you spent in each category this month. With both apps, there’s also an option for joint accounts as well as savings pots where funds won't be touched until they're needed--which could come in handy if saving more is on your New Year.

    But what is important above anything else is to choose the account that is right for you. Do your research and have fun with your new convenient account. 

    Which account did you decide to go for let me know in the comments!

    Looking for another digital bank? Monese review is also available here. 


    About the author 

    Mary Elizabeth

    Founder of MeMoreMoney. A self-taught finance nerd, learning by doing and experiencing. Bought first house at 21, paid off student debt, and save 100k by 30. Featured Personal Finance Expert in GO Banking Rates and Yahoo! Finance

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