New banks known as ‘challenger banks’ such as Monzo, Tide and Revolut are gaining a lot of attention and capturing a lot of customers and businesses in the UK.
The heavily mobile-app focused banks are taking peoples’ attention away from the traditional high street banks of Nationwide, Barclays and Santander – and have been adopted by over 12 million Britons to date.
We look into the different benefits of using challenger banks and high street banks when it comes to everyday banking.
Challenger Banks – Good banking experience
One of the main advantages of using a challenger bank to do your banking is that the usability is very strong and has a lot of added functionality for things like tracking invoices, expenses and budgeting.
Nic Redfern of Know Your Money explains: “Online challenger banks have been leading the way in mobile banking, offering new features and facilities that have made it easier for businesses to manage their finances. When using a business bank account, using a mobile app can help businesses to keep track of their expenses and send invoices, and many can also integrate with accounting software to automatically update their accounts.” Use this link to find out more.
Challenger Banks – No monthly fees
The majority of challenger banks such as Revolut and Tide do not charge monthly fees for using their business bank accounts, giving you the option to pay for an upgraded premium version for extra benefits.
Some challenger banks such as ANNA charge £6.50 per month, and this is the standard rate for high street banks which range from £5 to £25 per month.
If you claim an introductory offer, you can typically access no monthly fees for up to 24 months.
Challenger Banks – No FX fees
When sending money abroad, challenger banks have gained a lot of popularity for offering zero FX fees or fees with withdrawing money at an ATM abroad.
For someone that spends a lot of time working overseas or regularly sends money abroad, this can be a saving of hundreds or thousands of pounds in FX fees each year.
Nic Redfern continues: ““Although many high-street banks now offer mobile apps, in many respects they are still playing catch-up to the online challengers. Challenger banks use the latest Fintech and are more flexible at adapting to customer needs, which means they are in a better position to provide an effective business bank accounts and the banking experience.”
High street banks – Trust, security and history
When comparing challenger banks to high street banks, the latter comes with years of heritage, trust and brand loyalty.
With most of the UK’s biggest banks being over 100 years, the brand you bank with can often be passed down from your parents and include decades of customer loyalty.
Whilst banks are often criticised, they are reliable at keeping your money and you have peace of mind that any funds your store will be safe and the bank should stand the test of time, which is not always the case for new Fintech companies.
Equally, you have up to £85,000 in potential losses which can be compensated via the Financial Services Compensation Scheme – however, this is not protected by all challenger banks.
High street banks – Overdraft or loan facilities
High street banks can offer bank overdraft facilities and access to loans for personal or business use. You will usually receive preferential rates or faster access to finance if you use that particular bank.
This can be a huge advantage for lot of businesses and households that need a safety cushion to manage their cash flow or grow their business.
As it stands, challenger banks do not offer an overdraft facility or access to loans, however, many are in the process of rolling out new products and we can expect to see new overdraft and loans added to their repertoire in the coming months or years.