Most people hate banks. History shows that every time banking gives customers a chance to avoid interacting directly with a branch, they will. ATMs, phone banking and online banking? Account holders have embraced every one.
According to a recent Bankrate survey, a third of Americans haven’t visited their bank branch in the last six months.
And in the UK, the British Bankers’ Association, which represents the major UK banks, says there has been a “revolution” taking place. It points to the fact that nearly £1bn a day is transferred using the internet.
It also reveals that transfers using mobile phones and tablets are up 40 per cent in a year.
This is significant. Why? because many experts reckon that mobile will lead the next big change in how we bank.
With the advent of apps and smartphone, it’s a no-brainer that people would want to, effectively, carry their banks in their pockets. Indeed, the major banks all have apps that let customers check their balances, move money, set up direct debits and so on.
But these major banks still run huge branch networks. And their mobile activities can be seen as an adjunct to this existing infrastructure.
Over the last two years a new generation of mobile-only banks has emerged to challenge them. These newcomers offer purely mobile banking, with no branches and everything done through the app.
They’re making a lot of noise and acquiring thousands of customers, especially among younger people.
Here’s a look at the leading players.
The team behind Germany’s Fidor Bank were thinking about how mobile and digital could change banking as far back at 2006. They say their model is based on ‘Web 2.0. social media, e-commerce, games and mobile internet’.
The mobile-only bank was set up in 2009 in the middle of the financial crisis. It quickly established a very different approach to conventional banking, encouraging a two-way conversation about what features to offer and how to improve things. It was very early into the whole social finance thing too.
Thus, customers can sign in to their accounts via Facebook, but Fidor stresses that the social interaction is all about listening, and not just a gimmick. It’s even launched a ‘like’ interest rate: the more likes the bank gets on its Facebook pages, the higher the interest rate goes.
Last year, Fidor proved its innovative quality again when it teamed up with Ripple to use blockchain-type protocol to power money transfer. The bank has about 300,000 users in Germany, and is also live in Russia. It’s now going to new markets like the UK and US.
This German bank, launched by two Austrians, bases its service around an app with linked Mastercard card. It takes eight minutes to sign up, and the app logs details of every bit of activity. Number26 also supports P2P payments to other mobile users and displays charts to help you regulate spending.
Everything is customisable, so you can set limits or even disable payments etc. Interestingly there are no extra fees for paying for overseas goods in foreign currencies.
Number26’s banking partner is Wirecard Bank, which hold all the appropriate licences.
The Berlin-based mobile-only bank received $2m in funding last year and is now live by invitation in Germany and Austria. Apparently it started out as a pre-paid card for kids, but pivoted when it observed how many adults were seeking it out.
US-based BankMobile opened for business in the last few weeks with a mission to go after Millennials and be the Uber of banking. Thus, everything is done through the app, which is powered by Malauzai Software. Signing up for an account can be done in five minutes with a photo capture of official ID. Bills and cheques can also be photo scanned.
There’s a Venmo-style P2P transfer feature, and customers get an ATM card they can use at 55,000 locations, but they can switch it off from their app as an added security measure. Bankmobile doesn’t charge any fees on checking and savings accounts and offers a personal line of credit (max value of $5,000).
The firm says it’s targeting 25,000 customers in a year and 250,000 in five. BankMobile’s parent, Customers Bank, has 1.2 million student checking accounts.
Entirely digital, but not entirely independent. Hello bank! was created by Europe’s BNP Paribas Group in 2013 at a reported cost of €80 million, and is now live in France, Italy, Belgium and Germany
The mobile-only bank provides a range of dedicated apps supported by extended-hours access to an account manager by video call, online chat or phone. It offers a fee-free current account and even a savings account that comes with an Amazon voucher for €100.
The app also includes a lot of social and gamification elements – savers can receive contributions from friends and family members through social networks; and there are tools that provide visual representations of an individual’s financial situation.
The bank has stated it want to acquire 1.4 million customers by 2017.
By that point, US-based Simple had 100,000 users. But it had also made an impact with some eye-catching ideas. These included the Goals tool, which let users designate money for desired purchases, and Safe-to-Spend, which reveals how much is available to spend without affecting the long term goals.
France’s AXA Banque responded to the rise of mobile-only banks by starting its own: it created Soon in June 2013. The new bank revolves around a radically re-imagined interface. The main emphasis is on past and future spending, which is illustrated by a vertically scrolling dial.
In this way, the app also encourages users to think responsibly about their outgoing. It also embraces the social side of finances, giving users the chance to take pics of what they’ve brought and reveal them to friends via social media.
US-based GoBank competes closely with others such as Moven and Simple, but it has one big difference: customers can deposit cash at branches of Wal-Mart. The bank was jointly created by prepaid card pioneer Green Dot Corporation and retail giant Wal-Mart, and launched last year. Shoppers can sign up for the bank in a branch, and deposit cash there too. But the bank is otherwise entirely mobile.
There are no minimum balance fees, monthly fees or overdraft charges, provided customers have a minimum of $500 in the account. Account holders can also use 42,000 ATMs without incurring any fees. As with other mobile banks, users can send P2P payments, set up alerts, manage their money and gauge spend against income in a user-friendly ‘Balance Bar’.
In January, Moven confirmed it would roll out wearable banking on the Moto 360 smart watch. It was another example of the US firm’s desire to lead from the front in disruptive banking. It has a strong case. The mobile-only bank was launched in 2011, well ahead of the competition, and soft launched in mid-2013.
Its features included some of the ideas that pretty much every mobile-only bank now deploys: real-time spending alerts, budget visualisations, linked debit card. Last year, Moven bagged an $8 million Series A led by SBT Venture Capital. It is now targeting an international roll-out.
UK-based Atom was formed in 2014 by Anthony Thomson, the man behind Metro Bank, and Mark Mullen, the former boss of First Direct. They plan to create a digital-only bank with no physical branches, and are seeking £20m to do it.
Atom Bank is expected to launch in the first half of 2015 with a full range of products, including current accounts and mortgages for both retail and business customers. The firm has indicated that it will not necessarily undercut traditional banks, but will compete on service and convenience.
A little different from the other banks in the list…Osper is a UK startup targeted at children. The mobile-only banks service is built round and app and linked pre-paid debit card (from MasterCard). Parents can top up the app with funds and set parameters for how it’s used. They can use separate logins too. Kids can use the card for physical spend and the app for digital stuff.
Investors like it. Osper was a ‘graduate’ of the TechStars accelerator and closed a $10m (£6m) funding round last year, led by London’s Index Ventures. The firm has some competition. It’s very similar to another UK startup, GoHenry.