Why should I use app-based banking?
You might be wondering if the current account you use for your business is the best available on the market. You might find your bank hard to get to in opening hours and tired of being on hold on the phone for half an hour every time you need to ask a question. But now there are new banking options, these ‘challenger’ banks, as they are called, provide an alternative to traditional high-street banks, but what do they offer?
What does ‘app-based bank’ mean?
Over the past few years, several new challenger banks have appeared on the scene. Rather than invest in bricks and mortar branches, or work from a call centre model such as First Direct, these banks communicate with customers through their apps. Banks such as Atom, Starling, Monzo, Tide, N26, Tandem and Revolut are all app-based.
These banks allow you to open an account and manage all of your banking through your smartphone. Some offer business accounts and even loans. Many people have joined these banks, benefiting from a new generation of banking software.
What are the benefits of app-based banking?
You may well be thinking ‘But my high street bank has an app. What is different about app-based banks? Why would I switch?’ Here are a few things to consider is you are thinking of moving your account.
App-based banks have worked very hard on making their accounts as convenient and easy to use as possible. This is to cover the absence of branches and to keep their running costs as low as possible. Performing your daily banking tasks on your smartphone can save hours of travelling, queuing, or hanging on the phone.
If you are the kind of person who can never remember their telephone banking passcode and finds it hard to get to a branch, app-based banking might be worth considering.
Most app-based banks have a ‘freeze this card’ feature allowing you to instantly freeze a card that has been lost or stolen, without having to contact the bank. You may also be able to unfreeze it when you discover it hasn’t been lost and find it down the side of the sofa, saving a lengthy wait for a new card.
Some app-based banks offer interest on your current account, so it’s essential to see if you could earn extra interest by switching. Others may offer cashback on purchases.
App-based banks tend to send notifications to your phone whenever money leaves your account. This is a great early warning system should your card have been taken and can help you to keep track of direct debits and other payments. Some will notify you if your account is low on funds.
Foreign Currency Charges
If you frequently travel in your business, an app-based bank could save you money. Traditional high street banks tend to charge extra for using your card abroad. App-based banks tend not to. If you’re a frequent traveller or get paid in a different currency, the savings could add up.
Ease of saving
Most app-based banks have easy savings settings, like ’round-up’ features. This means that when you spend £4.67, 33p will be added to your savings pot. It’s usually easy to transfer this money back to your current account balance whenever you need it, but it can be a handy way to save up painlessly.
Are there any drawbacks to app-based banking?
There are some drawbacks in the app-based world, so here are a few things to consider before you take the leap.
If your business banking happens mostly in your local branch, app-based banking may not suit you. If your business is predominantly cash-based, or you have many elderly or traditional customers who like to pay by cheque, app-based banking is going to be an awkward choice.
No face to face customer service
If you have a serious banking problem, a friendly chat with your local bank manager is not an option with an app-based bank. Telephone support is possible, depending on the bank, but most offer the majority of their support over chat. If you like to see people face to face and dislike typing, this could be a disadvantage for you.
Fewer products available
You will likely be offered a greater range of products from a traditional bank than from a challenger bank. This could well change in future, but if you like to have your loan, business account, current account, mortgage and life insurance all with the same bank, you might want to wait a little longer.
No cash incentives
Traditional banks and building societies often pay a cash incentive if you move your current account over to their bank. App-based banks, at present, do not.
If you do decide to switch, the Current Account Switching Service makes it easy. Before you change, you will need to make sure the new bank will allow you to transfer any overdraft you might have, or pay it off first. The CASS service will move all regular payments and direct debits to your new account and make sure that any payments to your old account will be forwarded to your new account.
Technological changes in banking are proceeding at a rapid pace, so even if you aren’t thinking of switching to an app-based bank right now, it is worth keeping an eye on the new accounts available. Even if the disadvantages outweigh the benefits for your business at present, this could change. As we move towards a cashless way of life and cheque books are finally consigned to history, the drawbacks of challenger banks will fade.