The 5 Best Online Banks – Banking for Everyone
Technology has brought a lot of convenience to our financial activities. Whether it’s being able to pay for merchandise, open a savings accounts, transfer or receive funds, the Internet and mobile banking have changed the way we interact with money.
Online banks, or challenger banks as they are sometimes referred to, have started to contest local brick-and-mortar financial institutions through the use of modern financial technology (fintech). The emphasis falls on ease of use, lower costs, and online-only operations.
Although plenty of online money transfer services exist – think Venmo, PayPal, or TransferWise – institutions have to abide by and get accreditation from local regulatory bodies (PRA in the UK, FDIC insurance in the US, ECB in the EU, and so on) to qualify as a bank.
Here are 5 of the best, most reliable digital banks you can work with today:
Formerly known as Number 26, this German fintech start-up was founded in 2013 and received its banking license in 2016. Its series A round of investments included PayPal co-founder Peter Thiel. Now, the company is also backed by Tencent Holdings, Allianz X, and Chinese billionare Li Ka-shing, among others.
With N26, you benefit from free retail and business accounts with no fees, as well as a deposit insurance of up to €100,000 (roughly $112,000). There are 0 commissions on card transactions in a different currency, which means you can use it overseas without worrying about additional surcharges.
If you want one of those sleek, transparent N26 ATM Mastercards, you can get one free of charge. You won’t even have to pay for shipping. Valued at over $3.5 billion, the financial institution currently has roughly 3.5 million customers across 26 countries, and a reputation for being one of the most reliable online banks there is.
One of the best things about N26 is that you can easily send money to someone else without an international bank account number. Provided the recipient is also an N26 customer, you’ll be able to moneybeam funds to them just by using a phone number.
In early 2020, Revolut completed a funding round that officially tripled its net worth to £4.2 billion (roughly €4.7 or $5.2). This turned it into the most valuable technology start-up in the United Kingdom. Not bad for a company that launched in 2015 with the simple goal to offer fee-free currency exchange rates.
With the Revolut app, you can spend and withdraw money in 120 different currencies and send money in 29 currencies. Although it has had its hiccups with customer service, Revolut continues to expanded its operations in order to address the fast-paced growth of its customer base.
You get charged no commission on the first €200 you withdraw abroad every month and there are no fees for opening an account. If you want one of the trademark purple-and-pink Mastercards, you can get your first one for free, although you will have to pay a small deliver fee.
As is the case with most services of its kind, you benefit from free online banking that offers financial statistics, options for recurring payments, budgeting, notifications, and more. The company even takes things to the next level by allowing its customers to use their accounts in order to trade stocks, commodities, and cryptocurrencies.
Revolut is available in the US, Europe, Australia, and Singapore.
Chime is an American fintech startup and the current market leader in the US region in terms of challenger banks. Early 2020 figures saw Chime amass over 8 million users as it was valued at nearly $6 billion. There are minimal fees, automatic saving options if you want to set aside a percentage of income, and expedited access to deposits.
Chime allows its users to open a spending account free of charge and without overdraft expenses, which is an attractive alternative to traditional banking. In addition, there is no minimum amount required to open a savings account. This is the definition of easy-to-use mobile banking.
The fast-paced growth of the company is due, in part, to new customers who cannot open new accounts at brick-and-mortar institutions because of poor banking history. However, its strength is also its main weakness – for all its ease of use, Chime doesn’t offer more complex operations, such as CDs (certificates of deposit) or loans.
While Ally is not a digital native fintech start-up, it does offer online banking services to compete with the others on this list. They’re also one of the oldest online banks on the list, as the initiative grew out of the General Motors Acceptance Corporation (GMAC) at the end of the 2000s.
The great thing about Ally is that the parent company, Ally Financial, is publicly traded on the New York Stock market. This means that you benefit from the reliability, insurance, and compliance of a traditional bank, with none of the fuss or expenses.
With Ally, you can open both spending and saving accounts without the strings of monthly minimums or maintenance fees. There are over 40,000 ATMs where you can check or withdraw cash at your discretion. The bank’s savings account rate is also a big plus. If you like putting money aside, Ally should be at the top of your list.
On April 17, 2020, Ally came to the aid of its customers with massive financial relief – anyone who had a negative balance was forgiven, a move which was particularly useful for those receiving COVID-19 relief funds.
Founded in 2015, Monzo was responsible for the quickest crowd-funding campaign in history, managing to get more than £1 million (€1.1 or roughly $1.2) in less than two minutes. In 2017, Monzo was licensed as an official bank by UK’s PRA and FCA regulatory bodies.
Although it started with free ATM withdrawals abroad, the company soon changed its policy to one that closely resembles Revolut’s approach. There’s free monthly withdrawals up to £200 and a flat commission for anything above. Monzo makes it easy to add cash to your hot coral card using PayPoints, and the set-up process takes just several minutes.
You can even add it to your Alexa and start banking through voice commands.
Unfortunately, Monzo is currently available only for UK customers 16 and above. However, the service is slowly making its way into the US market. Until it becomes a licensed US bank, Monzo has partnered with Ohio’s Sutton Bank to offer contactless payment in the country.
A Market That’s Still Growing
Online banking is poised to grow and challenge traditional institutions at an even larger scale. Low-cost, high-accessibility banking available on a mobile device or desktop will likely be the norm in the future. This is particularly advantageous for people who travel and send or receive money in more than one currency.
Even the big names in financial services are acknowledging the trend and have since taken steps to offer advantageous home-banking or Internet-banking options.
If you’re looking for an easy way to open a bank account or a good long-term investment, challenger banks might be the right choice for you. Most of the names on this list have seen a steady growth in their customer base over the past years and there’s no sign that the evolution is going to stop anytime soon.
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