Five Top-rated Digital Banks in the UK – Updated January 2022
Digital or online or challenger banks are no longer a new concept worldwide. Online banks have established their positions in the last few years and challenged the high street forever. Although the big banks still dominate the UK banking industry, such as Lloyds, RBS, NatWest, Barclays and HSBC, the digital banks are increasing the customer number very quickly.
Who is the top rated digital bank in the UK in 2022?
Currently, I have personal and business accounts with Starling, Monzo and Revolut banks. Instead of rating and reviewing the banks, I give the power to the bank customers. I will be using aggregate ratings from app stores and the TrustPilot website of the five most popular digital UK banks.
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Recent news on UK digital banks
- Among the five digital banks, Revolut is the far largest bank in terms of customer base. According to a 2021 report by Statista, Revolut, Monzo and Starling have more than 15 million, 5 million and 2 million retail and business customers respectively.
- Recently, Chinese tech gaint Tencent has invested in Mozno which values the bank at $4.5bn. Earlier, Abu Dhabi Growth Fund also took a stake in the bank.
- According to funding, Revolut is most valuation online bank in the UK, at a $33bn after a funding round by SoftBank’s Vision Fund 2 and Tiger Global Management.
- Starling Bank CEO Anne Boden said that her bank would go publick in one or two years. She mentioned the IPO mostly like would take place in London where the company is headquatered.
- In December, Monese acquired Dublin-based Trezeo, a financial service provider for self-employed workds. Trezeo calculates how much a worker should earn based on their income patterns, then gives them a steady paycheck each month. If a worker earns more than usual, Trezeo sets aside that extra money. And if they earn less than they normally do, the company will make up the difference using credit.
- In a news article, Atom Bank said it has seen a 500 per cent jump in job applications since it introduced a four-day week for staff with no loss of pay. Currently it has around 500 employees.
- Last year, JP Morgan Chase launched Chase current account, offering some amazing benefits to its customers.
Benefits of online bank accounts
I believe that ease of application and communication are the most critical factors why customers are flocking towards digital banks. Here is a list of other benefits:
- Hassle-free account opening and day-to-day account management – install the app on mobile and tablet, that’s it!
- Digital banks have reduce the foriegn exchange (FX) fees drastically – from low fees to no fees at all.
- Raised the bank and card related security features. Most of them allow blocking and unblocking accounts, cards and services using the apps.
- Real-time transaction notification via apps or text messages
- 24×7 customer service – this is particular very important these days when banks and other financial institutes are either closed or maintaining social distancing
- Some of the additional features these banks are offering cashback, accounting and tax submissions, investing in stocks and crypto, etc.
Is my money safe with a digital bank?
Most digital banks are Financial Services Compensation Scheme (FSCS) protected, which means that your money, up to £85,000, is protected if your bank goes bust. Some banking apps might not have received their banking license yet, but still offer some protection under the Financial Conduct Authority (FCA). This means your money is protected because the online bank has stored the asset at a registered bank.
Before opening a bank account, you should always check the terms and conditions mentioned on the bank website and app.
Should I switch from a traditional to a digital bank?
This is normal to question yourself if you should switch to a digital bank from a traditional high street bank. There is no right or wrong answer to the dilemma. It depends on your requirements, satisfaction level with your existing bank accounts, services you are getting, the monthly fees (if you are paying anything), etc.
It would help if you always did enough research before solely moving to a digital bank. Digital banks also have limitations compared to traditional banks too.