Challenger banks such as Monzo, Tide and Revolut are gaining a lot of attention and capturing a lot of customers and businesses that until now have used traditional high street banks.
Whilst using a challenger bank that has no branches and is predominantly mobile-app focused feels like a leap for many, they are currently being used by 12 million Britons and they offer a range of benefits over traditional high street banks.
Good banking experience
One of the biggest benefits of using a mobile-app challenger bank is that they have invested more into the user experience for the customer, with apps offering a lot of strong usability and functions for things like tracking invoices, expenses, budgeting and more.
Nic Redfern of Know Your Money explains:
"Online challenger banks have been leading the way in mobile banking, offering new features and facilities that have made it easier for businesses to manage their finances. Using a mobile app can help businesses to keep track of their expenses and send invoices, and many can also integrate with accounting software to automatically update their accounts.”
“Although many high-street banks now offer mobile apps, in many respects they are still playing catch-up to the online challengers. Challenger banks use the latest Fintech and are more flexible at adapting to customer needs, which means they are in a better position to provide an effective business bank accounts and the banking experience."
No monthly fees
The majority of challenger banks including Revolut and Tide offer zero monthly fees for using their business bank accounts, giving you the option to pay for an upgraded premium version.
There are, however, some challenger banks such as ANNA that charge £6.50 per month, and this is the standard rate for high street banks which range from £5 to £25 per month.
You should always look for an introductory offer, with no monthly fees often offered for periods as long as 24 months.
No FX fees
For anyone sending money abroad, to a business or individual, challenger banks have gained a lot of traction for offering zero FX fees or fees with withdrawing money at an ATM abroad.
For someone that works abroad a lot or regularly sends money abroad, this can be a huge saving every year.
No overdraft or loan facilities
One of the downsides of challenger banks is that they do not offer an overdraft facility or give you access to loans or finance.
Having an overdraft can be a real safety cushion for a lot of businesses and can help them maintain a healthy cash flow.
Equally, the option to apply for extra finance or a loan during a growth spell or slow period can be vital to a business.
Currently, challenger banks do not offer an overdraft facility or access to loans – however, many of them continue to roll out new products and it is expected that many will offer funding lines over the next few months or years.