Time to branch out?

The new breed of app-only “neobanks” are founded on promises of easy money management, flexibility and complete financial control for consumers exclusively via their smartphones. But what happens if you lose or break your mobile, or the app is faulty?

Such restricted access is probably why the fintech firms have had a limited impact so far. Yet with Atom Bank currently offering the best one and two-year fixed rate bonds available, is it time to consider these digital startups as serious challengers to major high-street banks?

UK neobanks have not managed to gain much traction so far – Monzo may have already distributed 35,000 prepaid debit cards, but Atom currently only has 1,800 customers and Starling acknowledged in a report that little progress has been made. Despite liberating banking from physical branches with automated services and biometric technology (identity authentication via face, voice or fingerprint recognition) while also offering advanced tools for budgeting and investment to rival the traditional lenders, it seems consumers are struggling to convert.

This is demonstrated by the fact that the four largest lenders have lost only 5% of their market share since 2005 – given this, it is unlikely that mobile-only firms will be equal challengers any time soon. In all probability, those startups that do survive will depend on being absorbed by their established predecessors.