You’d be forgiven for thinking that current accounts were only offered by the big, traditional banks you find on the high street, but that’s far from the truth. By moving away from them and instead experimenting with challengers in the world of financial technology you can find current accounts more tailored to what you need.
Whether they come in the form of e-money accounts, pre-paid debit cards or online challenger banks, there are plenty of options away from the mainstream, so is it time to try something different?
There are still plenty of reasons to stick with tried and tested options, but here’s why you should consider a newer brand.
What are the alternatives?
Alternatives to traditional banking come in all shapes and sizes, but new competitors growing steeply in popularity are ones you can’t find in your town centre.
The new crop of banking services includes modern challenger banks, newly set up banks with the distinction of not having a physical presence on the high street, and e-money accounts, prepaid, online current accounts where your money is ringfenced in the company’s own bank account. Both versions offer the same general function, usability and security of old-fashioned banks- but aren’t old-fashioned.
Modern banking alternatives include Monzo, Revolut, Monese, Starling Bank and Suits Me amongst others.
The UK are setting the standard
The UK are by far the market lead when it comes to banking alternatives.
The 2008 financial crash was the catalyst for the formation of challenger banks. The Financial Conduct Authority (FCA), the industry regulator, has issued hundreds of new banking licences in the last decade, more than they had issued in the previous century.
The FCA’s flexibility in authorising new banking services has been a massive success with other markets keen to copy the British method. The Electronic Money Regulations 2011 have also allowed companies offering e-money accounts to spring up and start competing with the big banks.
Hong Kong has just issued 8 new licenses, following the model the UK has been following for nearly ten years. The Singapore government has also poured millions into financial technology (fintech) over the past couple of years in the same vein, proving how attractive and trusted the British system has become.
Whether using a fintech alternative to supplement your regular current account or ditching the conventional all together and using online competitors as your single method of banking, there’s plenty of perks.
New companies are built around modern tech, so instead of trying to shoehorn in modern techniques into an entrenched, older system, they can offer many things old banks would struggle to.
Easy to open and Inclusive
Setting up a regular current account takes time and effort. Address confirmation, lengthy identity and credit checks, days long processing times- even the most patient customer will find the process outdated and slow.
If you’ve got a poor credit history, irregular income or don’t have a fixed UK address there’s a chance you risk rejection any way.
Modern banking alternatives don’t require drawn out verifications. Usually, they carry out an identity check which, using new technology, can take a few seconds through your web browser. After that, and confirmation of your contact details, you can have an account in ten minutes!
Shorter, less invasive checks mean that people who might struggle to get a conventional current account can. Anyone who’s found themselves financially excluded through no fault of their own can access current accounts they might otherwise struggle to get.
Less debt risks
Since it is quicker to open an online banking account companies, especially e-money accounts, tend to compensate by not offering credit or borrowing facilities. This isn’t necessarily a bad thing.
If you’ve struggled to budget and have found yourself tidied up in an unarranged overdraft before, that can’t happen with an online banking account. Getting an account that provides the pure basics, a current account where you can only spend the money you have, gives you a chance to rebuild and removes any temptation to borrow.
When you’re competing with some of the world’s biggest banks you must have unique selling points which stand out above the rest. This means customers can take advantage of services a regular banking service might overlook.
Traditional banks often provide unadventurous tools- you might get the big brand name but get a slightly lacklustre package of tools at your disposal. From modern challengers you can expect better budgeting tools, professional looking graphs, sleeker mobile banking apps and over all smoother experiences when managing an online bank account.
These current accounts are built around the apps and web browser portals, not the other way round. You’re almost guaranteed a better experience in this regard.
Better Customer Service
Much like innovation, if you’re trying to stand out from the bigger banks and give customers a personalised experience you need to set the standard with customer services. Less soulless, call centre interactions, more genuine responses from people who actively want to help you out.
Better customer services are vital for challenger banks to prove they are totally transparent and accessible. Suits Me, for example, have a large multilingual team so all our customers can get equal access to support regardless of the language barrier.
Off the high street current accounts have to have other attractive features to temp new customers, and they don’t disappoint.
Lots offer rewards for shopping with their retail partners, depending on who their partners are this can save you a lot of money in the long run. If you find one who’s partnered with a supermarket, for example, you can use your account to consistently save whilst doing your weekly shop. This is a trend even big banks have tried to emulate. Santander, for example, now offer limited time cashback rewards, but only after several years of their competitors doing the same.
Challengers can also offer services banks overlook, Revolut allows you to buy crypto currencies and gold through the app, plenty of others allow you to swap currencies without a charge or unfair exchange rate.
After decades in business it’s undeniable that the big banks still have many things their younger competitors don’t. They have to compromise to make sure their business actually makes money along side offering glitzy apps and contemporary solutions.
Less/no Credit and Interest
Typically, e-money accounts don’t offer credit, or at least don’t offer the same amount of credit. As mentioned earlier, you can’t get credit cards or overdrafts with most banking alternatives so, if they’re a must have, you might have a problem.
For online banking services who make it easy to set up an account, it’s a balancing act. If a company doesn’t check your credit score, they can’t risk offering credit afterwards. So that’s a no to credit cards.
Some challenger banks like Starling Bank do offer interest in their savings accounts, but at lower interest rates than their bigger competitors.
Unlike banks, some alternatives can’t offer their higher end current accounts without a first load fee and a monthly maintenance fee. Others that are free won’t offer the same benefits until you’ve upgraded to one of their premium accounts.
Basically, if you don’t want to pay, chances are you’ll get the exact same perks as you’d get from a regular bank.
Luckily these fees aren’t hidden away and are typically the first thing you see when you look at their website, with rewards that come with off-the-high street alternatives account holders will probably pay off their monthly fee with the money they’ve saved whilst shopping.
If you’re looking for continuity of service, older banks have the upper hand. Even though they’re all regulated by the FCA, challenger banks and online-only accounts don’t always have the same high levels of protection as other banks such as cover under the Financial Services Compensation Scheme (FSCS).
An example of this came in June 2020 when the insolvency of the German company Wirecard AG lead to thousands of customer’s being temporarily locked out of their accounts by the FCA. Wirecard, whose UK subsidiary provided prepaid debit cards to dozens of alternative banking services, had their license blocked by the FCA whilst they clarified whether their customer’s money would be safe from creditors as the accounts didn’t have FSCS cover. After an investigation, the accounts have since been reopened.
If your going to open an account with a banking alternative make sure to check for FSCS info at the bottom of their webpage. If they are not covered by that, instead check to see if your money is kept safe in a protected, ringfenced account.
No physical branches
Even the bigger banks are taking a more online focused approach, but after endless email chains and been told to hold on multiple phone calls at least you can still venture out to your local branch to get face to face support.
Being online only, you won’t get that option. Online banking may be the future, but if you’re happier with old-school meetings with your local account manager you might feel short-changed.
The flashy tools and cashback perks of modern substitutes are getting better and better and have evolved swiftly since their post credit crunch inception, but it’s impossible to ignore what centuries of practice and product refinement have given established banks in the city.
Nonetheless, alternative banking services are the future. Whilst they’re still trying to compete with their larger ancestors, it’s undeniable that their attractive features are decent grounds for you to give them a go. Now’s the time to take advantage of them.
Author Bio: Peter East is a professional content writer for Suits Me. He has training in BA Journalism and has an interest in political and data journalism. When not on the lookout for new stories he’s been developing a new podcast.