Is your money safe with an ‘app-only’ bank?

A number of new banks are counting on consumers being happy to manage their finances via their smartphone.

But is your money safe with an “app-only” bank?

Such banks offer accounts that are set up and managed solely via an app. (For the uninitiated, an app is a piece of software on a smartphone or tablet that connects users directly to a company without visiting a website.)

The big app-only banks, such as Atom, Starling, Tandem and Monzo, have attracted millions of pounds of savers’ deposits.

Atom Bank is arguably the most recognisable app-only bank. It has been up and running since 2015 and is chaired by Anthony Thomson, co-founder of Metro Bank. It offers fixed-rate savings accounts and mortgages, with current accounts, debit cards, overdrafts and instant access savings all planned for this year.

Atom is one of the first banks to offer biometric security – logging in via face, voice or fingerprint recognition.

But while these futuristic features might appeal to millennials, baby boomers will be more attracted by the table-topping savings rates that Atom offers. It’s likely to be this older generation that is concerned about the security aspects of app-only banking.
The FSCS, the Financial Services Compensation Scheme, protects savers’ money up to £85,000 should the bank go bust.

Money held in Atom’s savings accounts is covered by the FSCS, and the same goes for several of its rivals, including B, Starling and Tandem.

These banks all have British banking licences and are regulated in the same way as high street banks. As well as attracting customers with competitive savings rates, app-only banks are promising a new kind of banking experience that will help people manage their money better.
If you need help, app-only banks usually have traditional call centres as well as the facility to start a web chat from within the app. If you lose your smartphone you’ll need to phone your bank to let it know.

It can help you block payments or set up your banking on a new device. As long as your login details are secure, whoever has your phone should not be able to access your bank accounts.

Atom states that no data is stored on the app or the phone; instead it’s held on the bank’s secure servers.

Another new bank is Monzo, formerly Mondo. It currently offers a prepaid card, but money on the card isn’t protected by the FSCS. A current account with full FSCS protection is due to be launched later this year.

Revolut is another app-only outfit that started life as a prepaid card. Its foreign exchange payment card and app, offering near-wholesale exchange rates, have proved a hit with travellers.

It’s recently added new features that replicate a current account; for example, a sort code and account number. But money held with Revolut isn’t protected by the FSCS.