Smartphone online bank accounts?

Recently, there has been a wave on banking and savings app for your smartphone which aims to give you a helping hand with your budgeting, saving and more generally with managing your finances in the way that traditional banks do not yet offer.

If you are someone who does not have a smartphone or is not particularly smartphone-savvy, these apps will not be for you. Likewise, if you are extremely content with dealing with your banking directly with the branch, then you may want to give the apps a miss. See also trends in digital banking.

What is app-based banking?

App-based banking is quite self-explanatory in its most basic sense, it is a way to bank using a smartphone application. Whilst you can get a NatWest, Halifax, Santander etc online banking app, these are not actually what we are talking about since they are not designed to be solely app-based and do not have functions to help you save and budget. These are just another form of online banking via an app for continence and on the go purposes.  Newly launched banking apps such as Monzo, are completely app based.

Most of the new companies offering the apps provide us with a free app, however, some do have costs associated with running them.

Is smartphone banking safe?

When it comes to your personal finances, safety should always be the priority. Therefore, it is important to know if and how your money is protected when using one of these apps. Traditional, UK regulated banks have the full £85,000 financial services compensation scheme (FSCS) protection in place.

Some of the online banking apps also have FSCS coverage, however, be aware that some do not. Instead, the app will feature an ‘electronic money’ licence, which means that they have to hold your money inside of your account ring-fenced from their operating cash – this is normally through a big bank like NatWest or Halifax. If the digital bank were to go bust, you should be protected as your money is technically in a separate account.

However, if the bank which your money is ring-fenced with went bust, then your finances may not be protected and this way you can lose out on your money. This is due to it not being counted as a deposit, in the way that money in a savings account would be.

Savings are automatic

The apps are cleverly designed with the consumer in mind. Featuring a lot of innovative technology, it makes saving for your personal goal easier than ever.

The apps can perform calculations based on how much you want to save each week or month and then can automatically take out that amount from your account and place it into a savings account for you. You can also interact with the app to tell it to take less out if you are feeling like you are in more need of the money in any given month or week. You are also able to move money back into your current account whenever you please.

This feature is intended to help you save without you having to think about it, which in turn should mean you save more than you would if you were placing the money into your account each time yourself.

What are some good apps?

Monzo: The Guardian approved app Monzo launched in 2016 and is a consumer favourite. Monzo offers the users real-time notifications which highlight when you use your debit card and about your general spending habits which is grows to learn over time. You also have the option to set money aside into pots where you can choose to round up each purchase to make to the nearest pound, and what’s left will filter into the pot.

Starling Bank: This app, Starling Bank, offers a full current account which can be opened in a matter of minutes. Like with Monzo, the app features real time post notifications and updates you on your savings goals. Starling bank is the first app-based bank to open current accounts in the UK.

If you are short on cash for whatever reason or simply need to take out a loan, see what a guarantor loan has to offer you. By taking out a guarantor loan, you are more likely to be accepted, even with a bad credit rating. Essentially, someone with good credit ratings (a guarantor) will co-sign the loan agreement and if you are unable to pay the loan back, they will do so on your behalf.