Monzo, Starling Bank, Revolut, or TransferWise?

 

Last updated on September 22, 2020 by Chad Tennant

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Over the past few years, Britons have been showered with new financial companies. These financial technology companies (fintechs) and challenger banks want to replace established banks and the old guard. They aim to make financial dealings more convenient, mobile, hassle-free, and cost-efficient. For example, customers can open accounts using smartphone apps instead of visiting branches. Also, unlike traditional banks, their products and services are designed to accommodate new types of workers, including freelancers, remote workers, digital nomads, and global citizens.

How to Choose a Mobile Banking App/Company

Choosing the best mobile banking app depends on three factors, including your needs, financial goals, and budget. Understanding those aspects will make it easier to select the right partner and company.

Assess your needs first. Before evaluating financial apps, consider your requirements. For example, you want flight insurance because you travel a lot. Or, you request payments often and want to use a customizable link to make the process more efficient.

Understand your financial goals. For everyday financial transactions, mobile-first banks are excellent. However, suppose you want to start investing or seek a tax-exempt account. Most challenger banks don’t offer robust investing platforms. Moreover, tax-free accounts are rare. Thus, you might have to look around or stick with the status quo to achieve your goals.

Consider your budget. While free accounts/plans are standard with neobanks, users must pay to access more features and benefits. It’s the classic freemium model that thousands of tech companies use. They offer free plans with the goal of converting users to premium accounts. Secondly, monthly plan/subscription fees can add up to over a hundred euros, pounds, or dollars annually. However, for some people, paying monthly fees might not be financially prudent or practical for their budget/saving objectives or debt obligations.

Standard Features

Fintechs and neobanks will continue to add products, services, and features to compete with their rivals and traditional banks. What one company doesn’t have today, it will likely offer in a few months to a year. Therefore, you needn’t worry about missing out on the long term. Challenger bank apps typically have these features:

  • Virtual and physical bank cards
  • Instant push notifications on all transactions
  • Analytics and categorization of expenses
  • Multiple accounts for saving and budgeting goals (not the same as an interest-bearing savings account)
  • No foreign exchange fees when spending abroad
  • Free money transfers to other users
  • Make recurring payments
  • Download and print account activity
  • Connectivity to third-party apps, for example, Apple Pay and Google Pay
  • Card lock/unlock at your discretion, for example, if your card gets lost or stolen

Three challenger banks that should be on your radar are Revolut, Monzo, and Starling Bank. TransferWise, a money transfer company, should be on your radar as well. Let’s review and compare their products, services, and plans.

UK Challenger Bank Apps

Monzo

Monzo is a bank for people who live on their smartphones. It’s for individuals who want to get things done in a click and who don’t see the need for branches or checks. Its products/services include:

  • GBP current account
  • Individual Savings Account (ISA)
  • Interest-bearing account
  • Money transfer
  • Overdraft
  • Personal loan
  • Joint account
  • Teen account

Unique features:

  • Round up payments and save the difference automatically.
  • Withdraw up to £200 every 30 days for free (a 3 percent charge applies after that).
  • Get paid a day early by confirming your salary.
  • Divide and allocate your salary into different accounts automatically.
  • Switch your energy service to lower your bills.

Revolut

Revolut is on a mission to build a frictionless platform to use and manage money around the world. It has developed a platform allowing users to transfer, exchange, and spend money with a multi-currency card that is accepted everywhere.

  • GBP and EUR current accounts
  • Commission-free investment account
  • Commission-free cryptocurrency account
  • Insurance
  • Interest-bearing account
  • Money transfer
  • Teen account

Unique features (depending on the card/plan):

  • Earn interest on your money with Savings Vaults.
  • Round up payments and save the difference automatically.
  • Round up payments and donate the difference to charities.
  • Withdraw up to £600 each month for free (a 2 percent charge applies after that).
  • Split and settle expenses with your family and friends with “Group Bills”
  • Get 100 commission-free stock trades per month.
  • Buy, sell, and hold cryptocurrencies, including Bitcoin, Litecoin, Ethereum, Bitcoin Cash, and Ripple.
  • Buy and sell gold
  • Get 0.1 percent cashback within Europe and 1 percent outside Europe on all card payments.
  • Get delayed baggage and flight insurance.
  • Get exclusive partner perks.
  • Gain access to 1,000+ airport lounges worldwide with LoungeKey.
  • Get free airport lounge access, if your flight is delayed by more than an hour with SmartDelay.
  • Use a concierge service to help manage your lifestyle.

Starling Bank

Starling Bank is a mobile-only bank offering personal, joint, and teen accounts. Its app helps people take the stress out of money by letting them visualize and manage their finances in real-time.

  • GBP and EUR current accounts
  • Interest-bearing account
  • Money transfer
  • Overdraft
  • Personal loan
  • Joint account
  • Teen account

Unique features:

  • Round up payments and save the difference automatically.
  • Pay no fees on ATM withdrawals abroad, in any currency.
  • Spending insights to manage your money better.
  • Get paid back easily or split the bill with “settle up.”
  • Deposit and withdraw cash at local post offices.

Revenue Models

Since challenger banks differ from traditional banks, you might be wondering how Monzo, Revolut, and Starling make money.

Monzo makes money from overdraft, personal loan, and withdrawal fees. It shares revenues or collects fees through third-party product and service arrangements, for example, offering money transfer services through TransferWise. Click here for Monzo’s fees.

Revolut makes money through plan subscription fees and insurance premiums. It shares revenues or collects fees through third-party product and service arrangements; for example, customers can earn cash rewards through purchases at select partners (Revolut Perks). It charges fees on money transfers and withdrawals above its fair usage limits. Weekend transactions and currency conversion fees may apply. It makes money from replacement cards and delivery fees. Click here for Revolut’s fees.

Starling Bank makes money from interest on overdrafts, personal loans, and account balances. It charges fees on money transfers. It charges for replacement cards and certifying account documents. Click here for Starling’s fees.

Products & Services

Current Account

A current (checking) account is a bank account that allows you to conduct everyday financial activities, such as deposits, withdrawals, bill payments, and recurring payments. A current account typically doesn’t earn interest but may receive if it maintains a minimum amount as set forth by the bank, for example, £25,000.

All three companies offer GBP current accounts. Revolut and Starling Bank also have free EUR IBAN accounts.

Savings Account

A savings account is a bank account where you can store money you don’t need right away but have easy access to it. It typically earns a modest interest rate.

All three companies provide in-app saving mechanisms and interest-bearing accounts. Monzo customers can open tax-free savings, joint, and teen accounts. Starling customers can get joint and teen accounts.

Overdraft

Monzo and Starling Bank have overdraft protection, but Revolut doesn’t. For Monzo, you’ll be charged 50p every day your account is overdrawn by more than £20, up to a maximum cost of £15.50 a month. For Starling Bank, you’ll pay an equivalent annual rate (EAR) of 15 percent. If you go over the overdraft limit, a standard interest rate applies.

International Money Transfer

Monzo uses TransferWise to process money transfers. TransferWise is another topnotch fintech. It allows you to hold, manage, and convert money in multiple currencies at the best exchange rates possible, i.e., mid-market, interbank, spot, and “Google rates.” TransferWise charges 0.3 to 2 percent on most transactions, which is up to eight times cheaper than many banks. I’ve been using TransferWise since 2015.

Revolut also converts money at mid-market rates. Customers can send money for free up to £5,000 monthly (a 0.5 percent fee applies after that). A markup on weekends and certain currencies may apply. Revolut is one of two UK companies that offer free money transfers. The other is TransferGo.

Starling Bank does money transfers, but its rates are not as good as Revolut or TransferWise.

Investing

An investment account allows an individual to buy, hold, and sell financial securities, for example, stocks.

Revolut offers commission-free stock and cryptocurrency trading. Monzo and Starling do not support investment activities.

Insurance

Travel insurance might cover medical bills, lost valuables, and unforeseen expenses. Contents insurance pays for damage to, or loss of, an individual’s possessions. Mobile phone insurance takes care of damage or loss.

Revolut offers insurance products, whereas Monzo and Starling Bank do not.

Personal Loans

A personal loan is a type of unsecured loan. You typically don’t need to pledge any security or collateral to get the loan. The lender provides funds to use at your discretion but charges a fixed or variable interest rate on the entire amount or on money that’s used.

Starling Bank and Monzo offer personal loans, whereas Revolut does not.

Product Comparison

RevolutMonzoStarling BankTransferWise
GBP accountYesYesYesYes
EUR accountYesNoYesYes
Savings accountYesYesYesNo
BorrowingNoYesYesNo
OverdraftNoYesYesNo
Money transferYesYesYesYes
InsuranceYesNoNoNo
InvestingYesNoNoNo
CryptosYesNoNoNo
Joint accountNoYesYesNo
Teen accountYesYesYesNo
Monthly feeFree to £12.99/mo.FreeFreeFree

*TransferWise offers a “borderless” account, which is like a current account. Users can send, receive, spend, and withdraw money at mid-market rates. Bank details are available for the UK, EU, US, Australia, and New Zealand.

Category Winners

  • Best for sending money: Revolut and TransferWise
  • Best for holding multiple currencies: TransferWise
  • Best for saving: Monzo
  • Best for personal loans: Starling Bank
  • Best overdraft: Monzo
  • Best insurance products: Revolut
  • Best for global citizens: Revolut
  • Best card design: Revolut
  • Best perks: Revolut

Recommendation

Challenger banks aren’t reinventing the wheel, but they’re improving and simplifying how wheels turn. They offer similar products, compared to traditional banks, but focus on expediency through mobile platforms. Secondly, they provide products and services for customers who entertain global opportunities and experiences. Finally, they go the extra mile to offer perks and discounts via partnerships with other companies.

Revolut, Monzo, Starling Bank, and TransferWise are making waves in the UK. They are raising the bar on efficiency, transparency, costs, and customer support. Those value propositions make them viable candidates for your financial goals and activities. Currently, Revolut offers the widest range of financial products and services for British customers. Therefore, I recommend it over the competition.

 

Chad Tennant

Chad is a digital marketer, consultant, and publisher. At Digital Fodder, he offers insights and strategies concerning online marketing, ecommerce, working online, YouTube, and more. At Partnercade, he helps companies grow their affiliate program revenues and partnerships. Connect or start a conversation with Chad on LinkedIn.

 
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