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Best Online Banks In The United Kingdom

Updated on Oct 19, 2021
UK Banks

Are you thinking of switching to an online bank? 

The United Kingdom (U.K.) banking industry may still be dominated by the "big four" banks (Barclays, HSBC, Lloyds Banking Group, and the Royal Bank of Scotland/NatWest), however, digital banks with their innovative technology and consumer-driven approach to banking are starting to make their mark in the financial services industry and have begun to disrupt the big bank monopoly.

Many of the digital banks are headquartered in the UK and you have many options to choose from if you are looking for a different banking experience.

We have listed the top 5 online banks in the U.K. in this blog. Before we get to the list, we shall discuss what digital banks are and whether they are safe or not. 

What Are Digital Banks?

As the name suggests, these banks known by different names like online banks, digital-only banks, mobile banks, app-based banks, neobanks, or challenger banks exist only in digital form-they don't have an established physical location aka brick-and-mortar branches, like the traditional banks. 

They are usually app-based, hence are easily accessible on your smartphone. Traditional banks do offer online banking and mobile banking but digital-only banks exist entirely on digital platforms. 

Banking services and products ranging from current/savings accounts to investment in mutual funds, stock trading or trading in cryptocurrencies are all accessible through your hand-held devices, eliminating the need to visit a bank branch. Digital banking is the digitization of every level of banking, from front to back-end.

Digital banking has grown massively in recent years, thanks to the advancements in financial technology or fintech and the increasing demands of tech-savvy consumers for efficient ways of banking. According to UK-based research firm Juniper Research, the digital banking users in the world will exceed 3.6 billion by 2024, a 54% increase from 2.4 billion users in 2020. 

As per the latest stats, in the UK, 27% of adults have an account with a digital-only bank equating to about 14 million Brits as of January 2021. The number of people with a digital bank account could reach 23 million by 2026.
 

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Should You Switch From A Traditional Bank To An Online Bank? Are They Safe?

Unlike the traditional banks that rely on outdated legacy systems and old ways of doing things, this new breed of banks are more agile, technologically driven, and focus more on user experience which adds a competitive edge. 

Additionally, digital banks have low to no interest fees, competitive rates on foreign exchanges, high annual percentage yield (APY), better budgeting features, intuitive banking tools and are generally user friendly. 

As mentioned earlier, online banks don't have any physical branches, might have fewer financial products in comparison to traditional banks, and have no face-to-face customer support and advice (instead, you get the customer support via a phone line or a live chat feature in-app).

Most importantly, these app-based banks namely, Starling Bank, Monzo, Atom Bank, are fully licensed and protected by Financial Services Compensation Scheme (FSCS) which means your money (up to 85,000 pounds) is protected in case the bank goes under. 

For digital banks not covered by FSCS (do not hold UK banking licenses), such as Revolut and Monese, they are covered by the Financial Conduct Authority (FCA). In other words, if the app-based banks are not backed by the FSCS, then chances are that they are working with one of the traditional banks, and your funds are protected in a licensed bank that your digital bank has partnered with. 

Thus, it is important to note that, although the two types of banks are technically seen as "rivals", they do work together alongside each other, bringing superior banking services to customers. 

Many people still use traditional banks for savings accounts (because traditional banks tend to have marginally higher interest rates), credit cards, and overdraft facilities among others. 

They also make use of the services offered by digital banks to manage their finances such as everyday spending and daily budgeting.

When choosing the best online or digital bank, look at the services that they offer, unique features, and online reviews. The best online banks will depend on your financial needs and goals. 



Top 5 Digital Banks In The UK

Starling Bank: Best For Everyday Accounts

Voted as the Best British Bank and the Best Current Account 2021, Starling Bank is the top digital bank for a well-rounded current account. 

Starling has over 2 million users and has a 4.3/5 rating of 24,089 reviews (at time of writing) on Trustpilot. 

App store rating is 4.9/5 of 255,211 reviews and Google play rating is 4.5 of 57,559 reviews. 

 Services offered by Starling Bank:

  • A variety of accounts-personal, joint (maximum 2 people), business 
  • Fee-free spending abroad (uses Mastercard's exchange rates with no extra fees)
  • Interest on current accounts 
  • Overdrafts 
  • Free cash deposits into your personal and joint account via any Post Office 
  • Insights into your spending habits
  • Savings goals 
  • Real-time notifications every time you spend
  • Desktop features 
  • Loan facilities
  • Freeze and unfreeze bank cards in-app
  • 0.05% in-credit interest 
  • Mobile cheque deposits 
  • Regulated and authorized by the FCA and FSCS up to 85,000 pounds 
     

Monzo: Best For Budgeting 

Monzo is a well-established name in the digital bank world. YouGov named the bank as the UK's most recommended brand in 2019. The number of users now is over 5.5 million. Monzo started as a prepaid card but achieved a full banking license in 2017.

Trustpilot rating is 4.5/5 of 18,272 reviews. 

App store rating is 4.9/5 of 69,605 reviews and Google Play rating stands at 4.7/5 of 69,269 reviews.

If you are looking to save money, this is the bank for you. The company has gradually added features to manage your money better such as tools to set budgets, create saving pots and pay bills. 

Services offered by Monzo:

  • Accounts- personal, joint, business
  • Real-time notifications after every spend
  • Saving pots that set money aside by rounding up payments 
  • Set Direct Debits and standing orders to be paid directly from a pot
  • Interest on saving pots 
  • Free spending overseas (Mastercard exchange rates with no extra charges)
  • Create shared tabs with friends for splitting bills 
  • Set spending limits 
  • Free ATMs withdrawals within the UK/European Economic Area (EEA)
  • Overdrafts 
  • Personal Loan facilities
  • Energy switching 
  • 'Get Paid Early' salary advance feature 
  • Regulated and authorized by the FCA and FSCS up to 85,000 pounds 
  • Extra features on Monzo Plus and Premium accounts but comes with monthly fees
     

Revolut: Best For International Payments 

Revolut is the first British digital-only bank to reach unicorn status (privately held start-up company with more than $1 billion valuation). It is one of the fastest-growing digital banks in the UK, garnering 15.5 million users in Q1 2021, the largest number of users by a UK Digital Bank.

Revolut's multi-currency accounts let you hold 30 different currencies for free. It is handy for traveling abroad and sending international payments. Revolut claims that they use the exchange rates that you see on Google, so you can avoid paying hefty fees and marked-up exchange rates when sending money abroad. 

Note that many banks charge hidden fees on money transfers. The best way to find out the best deals on international money transfers is by comparing their exchange rates and fees side by side. 

The most notable feature is you can buy and exchange cryptocurrencies

Revolut's Trust Pilot rating is 4.5 of 93,238 reviews. 

App Store and Google Play ratings are 4.7/5 of 24,240 reviews and 4.7/5 of 1,249,375 reviews respectively. 

Services offered by Revolut: 

  • Account types available: personal, business, joint
  • Trade stocks, commodities, and cryptocurrencies
  • Get various perks, discount offers, and reward schemes with Revolut account 
  • Real-time spending notifications 
  • Budgeting and analytics to track spending and avoid overspending
  • Splitting and settling bills 
  • Free-fee spending overseas
  • Transfer money to 200+ countries at competitive exchange rates 
  • Hold or transfer money in 30+ currencies with no hidden fees
  • Open Banking to link all your accounts in one place 
  • Free debit card 
  • Freeze and unfreeze card in-app
  • Saving vaults with interest rates up to 0.65%
  • Regulated by FCA, has a European banking license from the Bank of Lithuania 
     
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Atom Bank: Best For Mortgages And Savings

Atom Bank is the UK's first all-digital bank to get a full UK banking license. Though it doesn't offer current accounts or use it for day-to-day spending like other digital banks we have discussed, it specializes in savings accounts and mortgages. It offers higher rates on savings accounts than its competitors. 

If you are looking to build your savings with a digital bank, Atom Bank is your best bet. For 4 years in a row, Atom Bank has been named as the Best Online Lender at the What Mortgage Awards 2021.

Trustpilot's score is 4.6/5 of 5,884 reviews. 

App Store and Google Play ratings stand at 4.7/5 of 20,020 reviews and 4.6/5 of 4,207 reviews respectively.

Services offered by Atom Bank:

  • Fixed-rate saving accounts 
  • Savings account interest rates ranging from 0.15%-1.40% AER)
  • Instant savers 
  • Mortgages 
  • Vigorous biometric security 
  • Regulated and authorized by the FSCS and the FCA up to 85,000 pounds
     

Monese: Best For International Students 

One of the most attractive features of Monese is that you don't need to have proof of address or credit history or regular income to open an account. For students or immigrants who have just arrived in the UK, you can open a current account straight away. The classic account is available for free for 12 months, after which there is a monthly fee. As of January 2020, it has over 2 million users. 

Trustpilot rating is 3.5/5 of 20,935 reviews. 

App Store rating is 4.8/5 of 43,789 reviews and Google Play rating of the app is 4.4 of 76,613 reviews.

Services offered by Monese: 

  • Current accounts in GBP and EUR at no extra charge
  • Business accounts 
  • Deposit cash through Post Office and Paypoint 
  • Real-time spending notifications
  • Free spending overseas 
  • Transfer money abroad to over 30 countries at competitive exchange rates
  • Transfer money to your account from abroad using the Monese European IBAN
  • Freeze and unfreeze card instantly in the app
  • Partnership with travel rewards scheme Avios and Paypal
  • Regulated by the FCA 
     

Takeaway

Before you decide which bank suits you best, better to determine what your banking needs and compare your options. 

The future of banking is digital and it is on your smartphone. From saving money, budgeting, and stock market trading. The bank of the future will be driven by changing customers' expectations, emerging technologies, and new business models. 

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