Since 2015, several alternative payment methods have emerged to disrupt the traditional banking and financial services industry. One of the most popular innovations is the rise of exclusively mobile banking.
Mobile-only banks allow users to control their money from their phones without relying entirely on geographic boundaries. But many traditional banks offer similar services through online banking, so what’s the difference?
In this article, you’ll learn how mobile-only banking is different from traditional banking, and whether or not you should switch to it.
What is mobile-only banking?
A mobile-only bank is a financial service where you can access your account using your smartphone or tablet. In addition to seeing an overview of your finances, you can also make purchases online and transfer money to other accounts.
If you have a debit or credit card with the solution, you can also use mobile-only banks to pay for products and services offline, just like you would with a traditional bank.
Now that you have a rough idea of what a mobile-only bank is, let’s explore how their services are similar and different from the solutions you are familiar with.
Create an account
With large Main Street banks, you may need to make an appointment to open an account. You can also apply online by filling out a form. You will also often need to provide verification, such as proof of address and your passport.
To sign up for a mobile-only bank, you’ll almost always need to sign up through the company’s smartphone app. You will usually need to verify your identity; the process will include showing your passport or driver’s license, while you will likely need to show proof of address.
For some mobile banking services, you’ll also need to record a short video showcasing who you are.
Traditional banks allow you to deposit money into your account online or, if you have cash or a check, at one of their physical branches. You can also check your account balance by using your card at an ATM and withdrawing money.
With mobile-only banks, you can also check your balance at an ATM and withdraw money if you have a card. However, you cannot deposit money into your offline account. So, to add physical money to your account, you have to do it through your main bank and then transfer the money through the app instead.
Traditional banks offer a range of customer support services. You can make an appointment, call them, or use a quick chat online. Additionally, you can contact them on social media and email them.
High street banks also have full frequently asked questions pages, as do mobile-only institutions.
Mobile-only banks also offer a variety of customer support options. Your contact will often contact them on social media or use online chat to speak with a team member.
However, the most significant difference from traditional banks is that mobile banks do not have branches on the main streets. Therefore, you cannot schedule an in-person meeting. That said, some mobile-only banks are introducing video chat options (as many physical banks have done in the wake of the COVID-19 pandemic).
As people travel more and more and often live in different countries, overseas transaction fees have become a hot topic of discussion. Traditionally, banks charge high percentages for using your card abroad.
Traditional banks often also give a low exchange rate relative to the market median at the time of the transaction.
With mobile-only banks, on the other hand, you will often benefit from a favorable rate when transacting abroad. In many cases, you will also avoid having to pay extra on top of everything you buy with your card.
But when it comes to ATM withdrawals, you might need to pay whenever you withdraw money beyond a specific limit each month.
Many mobile-only banks also offer tiered subscriptions, which allow you to waive ATM fees and other perks. Depending on your physical bank, you may also be able to get an account that you pay for but that offers additional benefits beyond the standard checking account.
Traditional and mobile-only banks offer additional benefits outside of their basic services. For example, some large retail banks are partnering with department stores, cafes and restaurants to offer discounts on certain items.
Mobile-only banks may offer discounts on these products. You can also purchase travel insurance through your account, which makes these options particularly popular for digital nomads.
With many exclusively mobile banks, you will have access to a master account when you register online. But in many cases, you will need a premium membership to open more than one.
Instead of accounts, many exclusively mobile banks have “jars” instead. These work the same as savings accounts, but whether you can expect to receive interest etc. varies from service to service. So while they can help you save for the holidays, you might not want to use them when putting money aside for a house.
Traditional banks usually allow you to open different types of savings accounts to go along with your personal account. These usually have fixed interest rates, and they’ll pay you a little extra cash on top of your savings each year.
To find the best savings account that meets your needs, you’ll need to do some shopping and consider the options available in your area.
While you can use your card anywhere in the world, some mobile-only banks are only available to residents of one country. For example, Monzo primarily serves residents of the UK. But some, like Revolut, are available in the United States, the European Economic Area (EEA), and a selection of other countries.
When you open an account with a bank, you can link to an account that is only available in the country you live in. But for large institutions like Santander, residents of several parts of the world can become a client.
If you move abroad, you may be able to transfer your account to your new place of residence. However, you will need to verify this with the individual bank.
Do you prefer mobile-only banking?
Mobile-only banks offer great flexibility in managing your finances. You can perform many of the same functions as a traditional bank, such as paying in stores and invoices.
But at the same time, they are still limited. You can’t get help at a branch if you prefer real interaction, and you’ll often have to meet free withdrawal limits or pay additional fees.
Before canceling your primary bank account, consider using mobile-only banks as a compliment. You can use your primary bank for bills and savings and mobile banking only for leisure purchases.
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