Make the most of mobile banking via your smartphone. From app-only accounts to budget and money-saving tools, managing your money has got a whole lot easier.
There is no doubt that the smartphone has changed our lives forever – from the way in which we communicate to the way we shop. But, until recently, the impact of the smartphone upon our financial lives was limited.
This is rapidly changing. According to research from financial services provider Sun Life, the use of budgeting tools and apps among the over-50s has tripled in three years – from one in 25 using such tools in 2015 to one in nine in 2017.
This, coupled with big banks’ sluggish adoption of smartphone banking, plus the often poor quality of these digital experiences, has led to a proliferation of smaller fintech (financial technology) start-up brands storming the marketplace.
Moneywise explores what six of these challengers do – Cleo, Monese, Monzo, Plum, Revolut, and Starling – and how they could change the way you manage your money in future.
App-only current accounts
If you’ve ever overspent thinking there was more in your account than was the case, free app-only banks, such as Monzo or Starling, might be for you.
Monzo, which launched a prepaid card in 2015 and gained its banking licence in April 2017, and Starling, which launched in July 2016, both have a simple premise: sign up to their current account, spend on your debit card, get an instant notification of spending via the app and an immediate true reflection of your bank balance.
Both apps also break down your spending habits into categories, making budgeting more intuitive, so it is easier to figure out where you might be overindulging. Monzo, for example, recently introduced ‘Pots’, which allows users to earmark cash, effectively ringfencing the money from day-to-day spending.
Valerio Magliulo, product and partnerships manager at Monzo, explains: “Pots gives you the ability to set money aside within your main Monzo account. It allows you to save and manage all your money from within the Monzo app.”
Starling has a similar feature called ‘Goals’.
With Monzo-to-Monzo payments, you can even transfer money through the app, using just the phone number of one of your contacts if they also have the app.
Starling, meanwhile, has created a marketplace within its app infrastructure to offer financial products from other companies.
Anne Boden, Starling’s chief executive, explains: “This marketplace ‘app store’ enables our customers to view and select other financial services solutions provided by selected third parties.
“This gives customers transparency and choice – something which the big banks have kept from them for too long.”
Consumers are also being drawn to Monzo and Starling because of their international nature. Neither bank charges for using its debit card worldwide and while Monzo has recently imposed fees on cash withdrawals abroad, Starling has kept its cash withdrawal rates at zero, making the debit card a Moneywise Best Buy for overseas spending.
As both Monzo and Starling have UK banking licences, up to £85,000 saved with them is protected by the Financial Services Compensation Scheme (FSCS).
Banking without borders
So eye-watering are the international transaction fees on traditional current accounts that fintech firms have popped up to remove the cost of moving money across borders.
Apps, such as Monese and Revolut, which both launched in 2015, are designed so that consumers are not restricted to where their current account can be used and which currency it works in.
Revolut says users can open a current account in as little as 60 seconds and begin spending, withdrawing and transferring money internationally in more than 130 currencies without incurring fees.
Revolut has also capitalised on the boom in interest for cryptocurrencies, such as the Bitcoin.
Nikolay Storonsky, chief executive of Revolut, explains: “We introduced cryptocurrency support following the huge number of requests we received from our users. Following months of development work, Revolut customers can now buy, sell and hold cryptocurrency.”
Meanwhile, Monese, which provides similar ‘borderless banking’, gives those who struggle for access to banking services in foreign countries the ability to bank without a credit rating or even a local address.
Norris Koppel, chief executive of Monese, says: “We’re on a mission to provide a helpful service to a lot of people who struggle with traditional banks because of their outdated paper-based processes and tech limitations. We’re empowering more people to easily bank like a local at home or abroad – wherever they decide to live.”
However, neither Monese or Revolut have a banking licence, which means cash isn’t protected by the FSCS. Monese doesn’t want a banking licence, while Revolut is awaiting a European Banking licence. Once it has this, customer funds will be covered up to €100,000 by the European Deposit Protection scheme.
If you hold money in your Monese account, you’ll be charged £4.95 a month for a 'Plus' account, or alternativley a more limited 'Starter' account is free. Revolut’s ‘standard’ service is free to use including a UK current and an EU account, the ability to trade in cryptocurrencies plus £200 of free cash machine withdrawals a month. However, the company does charge £6.99 a month for its ‘premium’ version of the account.
If traditional budgeting and money saving is too much hassle, you can let an app save money for you. Take it further still, and you don’t even need an app. Plum and Cleo don’t have their own apps; their services are fully integrated into the Facebook Messenger app, where they act as algorithmic middle men for your finances.
To get started on Plum, for instance, you sign up on its website and get redirected to a Facebook Messenger chat box. A ‘robot’ will begin asking you questions about your financial aims. After ascertaining your goals, the robot will then analyse your spending habits and begin to automatically draw money from your current account at a level it believes you can afford.
Plum uses financial firm Mangopay to take this money, which is then ringfenced and stored either with Barclays or with peer-to-peer lender RateSetter. With Barclays, you won’t accrue interest, but with RateSetter you can earn 3% with its Innovative Finance Isa. Plum says this means if Barclays, Mangopay, or itself goes bankrupt, you won’t lose your money. However, your money isn’t ringfenced if RateSetter were to get into difficulty as it is not FSCS protected.
Daniella Camilleri, spokesperson for Plum, explains: “Plum is different in a few ways from most other personal finance apps. We focus on helping you save rather than tracking what you spend. We all know that we spend too much on food and coffee, but that doesn’t really help. The main idea with Plum is that we will find ways for you to save without you having to change your lifestyle.
She adds: “Artificial Intelligence (AI) is also a key differentiating factor, as the fi rst AI savings chatbot is at the heart of our product. AI allows us to offer a bespoke experience, and soon that will become expected.”
Cleo can also be used for budgeting and auto-saving, as well as to send money abroad, make person-to-person payments, and even to switch utilities. Intuitive charity donations for spare change is a feature the app is looking to add.
Barney Hussey-Yeo, its chief executive, says: “One of the big draws of Cleo is that she’s a daily and habitual relationship. People interact with her as they would a friend, and that’s often the feedback we get: she makes dealing with your money stress-free because she’s responsive, personable, and superhumanly intelligent with regards to your finances.”
As with Plum, Cleo doesn’t have a banking licence. It uses Mangopay to transfer money, while any savings are stored with Barclays too. Again, it has no FSCS protection.
“I use my Monzo accounts for savings too”
Monzo user Eden, 25, a teacher from Croydon, says: “My old bank didn’t offer me any tools with which to manage my finances. I essentially used it to store my money.
“My friends had Monzo cards and the ease which they could send and receive money, see what they paid for and where and when they paid for it made me want one too.
“Monzo allows me to manage my finances as I go about my day. I use my Monzo current account for all my main transactions, and its Pots feature as a savings account and holiday fund.
“This year, I want to start saving for a house deposit and have enough in the holiday fund to go to Canada for five weeks in the summer.”
‘Plum has helped motivate me to save’
Aaron Jackman (pictured above), a 35-year-old vicar from Saddleworth, Greater Manchester, explains how Plum has motivated him:
“My biggest savings hurdle is what my wife and I call the X-Factor. Basically, anything we don’t plan for, such as the car getting scratched, parking fines, property damage, and friends inviting themselves round to stay at short notice.
“Plum has helped motivate me to save – and to save often – no matter how little for these life events. I feel like Plum is cheering me on as I aim to reach my goals.
“It also manages to successfully integrate the world of apps with banking. As a self-professed ‘app lover’ who hates budgeting, I have found that the interface is very fresh and current, and its conversation style is appealing.
“I feel that I can trust Plum, despite the fact that I haven’t met anyone face to face. Perhaps it’s something to do with the regular updates that I receive, the use of emojis and a light, engaging conversation style.
“Plus, Plum uses the Facebook Messenger app to communicate with customers. As I am already familiar with this way of communicating with friends, it wasn’t such a leap to have this conversation with a company.”