Current accounts: How fintech is revolutionising personal banking

2017 is set to be the year technology comes for your current accounts

New banks are launching current accounts that operate entirely online and via apps (Getty/iStockphoto)

Technology and money are no strangers.

Fintech companies and other pioneering start-ups have been behind a huge surge of innovation among financial products that have changed the way we manage our money. The personal and business loans markets have been transformed with peer-to-peer lending products so popular the Government has created a special innovative finance ISA to help consumers invest in them.

Tech has powered the sharing economy, with people now able to connect and rent out everything from their driveways to their cooking. It has enabled consumers to bypass the mainstream banks and do everything from exchanging money to making cardless payments.

However, for a long time current accounts did not receive the same attention. They are complicated products, requiring licences and intense regulation. Some challenger banks declared their intentions of launching current accounts, operating entirely online and via apps.

It’s taken a long time for those challengers to be ready to offer such accounts but now several have come to market within a short period of time. Of course, getting people to change their current account is notoriously tricky; even with the seven-day switching service many customers are nervous about the hassle and potential for frustrating mistakes.

Yet the numbers suggest more people are making the switch, often chasing better rates, perks and introductory bonuses. Data collated by the payments body Bacs shows that almost 96,000 switches were made last month and 90,000 in February, compared with less than 62,000 in January.

Many current account customers won’t look beyond the big high street banks, if they are prepared to switch at all. And that is why the newly launched challenger current accounts feel they need to offer something different.

Triodos – the ethical current account

For the first time this week, would-be customers can register for a current account with one of Europe’s leading sustainable banks, with actual accounts being offered via a phased roll-out starting in June.

The bank lends money only to organisations and projects that can demonstrate they are making a positive difference to society, and has lent to charities, community schemes, organic farmers and renewable energy projects.

Bevis Watts, managing director of Triodos UK, says that consumers can align their values with the food they buy, the energy they use and even their transport choices, but that daily finance options have lagged behind.

He argues that the current account market in the UK is “dysfunctional” partly because of the domination of a small number of banks. “We want people to really think about what their bank is doing with their money. Money doesn’t have to be invested in the arms trade, fossil fuels and tobacco; it can be used to do good things that help build the society we want to live in.”

Customers who open an account will be charged £3 a month across the board, rather than a “free” service that’s being funded through overdraft charges and penalties. The debit card offered with the account is made from natural plastic – a gimmick, some might argue, but one that could easily resonate with environmentally concerned consumers.

Coconut – the freelancer’s current account

The gig economy continues to grow, with about 5 million people in the UK working as independents. It makes sense that a bank account provider would want to cash in on that and that is why Coconut has sprung up – to provide tailored banking for freelance and self-employed workers.

It’s currently accepting early access requests and will launch fully later this year. The current account allows freelancers to track the tax they owe in real time and helps them manage client payments and expenses.

Customers can manage and track their income and outgoings via an app, and it even gives reminders of tax deadlines and the end of the financial year.

Robin Foale, a former managing director of business banking at Santander who recently joined Coconut, explains: “The big banks are ignoring a huge number of British workers. There are now more than 5 million freelancers, sole traders and independent contractors in the UK, making up over 17 per cent of the workforce. Some 55 per cent the people signed up to Coconut’s waiting list don’t have a business bank account despite freelancing for more than a year.”

Monzo – the techie one

Increasing numbers of customers are relying on their phones for their daily banking, with data from the British Banking Association revealing that customers used their phones to check their bank balances 895 million times in 2015 alone, a number that is no doubt rocketing upwards.

A number of fintech start-ups are trying to capitalise on this trend and Monzo is one. It received its full UK banking licence just this month and intends to launch a full free current account later this year, although customers can currently sign up to the Monzo Beta service.

The app gives customers a real-time insight into what they are spending and how they are spending it, helping to budget and stay in the black. Users can access their account via an app that gives data on their daily and monthly spending, as well as the overall health of their account.

It can currently be used via a prepaid card.

Atom – the first one

The first bank to gain a licence while being centred entirely around an app, Atom is racing ahead in the fintech current account stakes. It offers some far-sighted technological developments, including the opportunity to do away with passwords and even debit cards, instead relying on voice and face recognition.

Although it has had some success with a market-leading fixed-term savings account – signing up almost 5,000 customers in one day alone last month – the current account has not yet been launched. Expect it later this year, with a beta version being offered sooner to selected customers.

The musician Will.i.am, who is somewhat inexplicably a strategic board adviser for the bank, says: “Our lives are faster than ever before, but the banking industry hasn’t kept up. The scale of Atom’s ambition to help people understand and manage their money better, and its clever use of technology to give people an entire bank on their phones is awesome.”

The other ones

Those are just the banks that are likely to launch current accounts in the near future, but there is a tsunami of tech-led options on the horizon. Keep an eye out for Starling, which is currently in testing but will operate via an app and deliver updates on spending to help customers manage their money more efficiently.

And DiPocket is a new financial app that isn’t a bank but offers customers mobile banking facilities via a prepaid Mastercard.

There’s also Tandem, which pledges to eventually offer current accounts, credit cards, savings and loans. The start-up had to give up its deposit-taking licence last year after it lost some anticipated funding, however, it still intends to bring new banking products to customers later this year.