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what is digital banking?
Digital Bank – also known as virtual banks or internet banks—are financial institutions that operate primarily on the internet. These institutions allow you to manage your accounts from a computer or mobile device (app) from anywhere at any time.
Branch access is often non-existent or limited at digital banks, while some online divisions of hybrid banks still offer the option to step into a branch location. Because they generally don’t incur the costs to open and operate a network of branches, online banks tend to offer higher rates on deposit accounts and lower fees. Keep in mind that this trade-off means you often can’t walk into a branch if there’s a problem. Instead, you’ll be communicating over the phone, via email or online chat to resolve any issue
Digital banking need to know
Banks have security systems in place that ensure fraudsters can’t hack into your account whether you’re logged in online or on your phone. But still be careful – never share your online/mobile banking information with anyone.
If using one of the mobile apps featured in this guide, make sure you download the official version from your app store, and update the app regularly to make sure you benefit from any new security features. You should also protect your phone by setting a password, PIN or other screen lock (eg, pattern, fingerprint).
When it comes to your finances, you want to be sure your money’s safe – so it’s important to understand how your money’s protected. UK-regulated banks have Financial Services Compensation Scheme (FSCS) protection. This covers up to £85,000 of your money in the unlikely event of a bank going bust
While it’s nice to have a bank account with an intelligent mobile app, most consumers would agree that this shouldn’t be their number one priority. You may prefer to choose your bank based on the interest rates, incentives and customer service offered instead.
However, here are the factors you may want to consider when choosing the best mobile banking app for your needs.
- Branch access. Some of the top apps are produced by mobile-only banks. If you want access to a local branch, you’ll have to avoid these apps.
- Budgeting help. Some apps double up as powerful budgeting software, allowing you to clearly see where your money is going, and where you can stand to reduce your spending in order to save more.
- Customer service. Some of these apps connect you to directly to a staff member via live chat. This is arguably the most efficient way to receive assistance. Others app include a phoneline for customer queries, while some rely on an email ticket service.
- Range of useful features and ease of use. For the most part, this is subjective. Still, we’ve ranked our favourite mobile banking apps based on these factors below.
- One or more forms of photo ID
Such as driving licence and passport
- Proof of address
For example, a scan of a utility bill or similar
- Personal details
Such as your nationality and address history
- Credit check
You’ll need one if you’re applying for an overdraft
Although these apps aren’t solely meant for budgeting, the main ones we feature in this guide can really help you to keep your finances in check.
They give real-time notifications when you spend or save – so for example, if you bought something for £5 in Boots, you’d get an instant pop-up on your phone telling you what you’ve spent.
Plus this helps you spot fraud too. If you get a notification your debit card’s been used in Nando’s, and you’re sitting at home watching TV, you can immediately freeze the card within the app to stop any further fraudulent use, then call the bank to let it know about the fraud (and to send you a new card).
Another feature they have is to give you insights into your spending habits. This means you’ll easily be able to see how much you spend in one particular shop each month (coffee addicts beware!), or more generally how much you spend on entertainment or travel.
This should make it easier to budget and keep track of your money, allowing you to cut the cloth where needed.
Top Digital banking Apps for 2021
Arranged overdraft cost: 15%, 25% or 35% EAR variable. The rate you get depends on your credit history.
Unarranged overdraft cost: None
Minimum monthly pay-in: None
In-credit interest: None
How to get the app: Download for iOS (rated 4.5/5) or Android (rated 4.4/5)
Overseas fees: No spending fees. Unlimited fee-free ATM withdrawals in EU, Iceland, Liechtenstein and Norway if used as a main account (otherwise only fee-free up to £250/30-day period, 3% fee above). Elsewhere, withdrawals are fee-free up to £200/30-day period.
Arranged overdraft cost: 19%, 29% or 39% EAR variable. The rate you get depends on your credit score.
Unarranged overdraft cost: If you have an arranged overdraft but go over your limit, you’ll be charged the same interest rate. If you don’t have an arranged overdraft, it’s 39% EAR variable (max £15.50/month).