In this tutorial, I’ll explain FinTech and challenger banks and show you the apps to use so that you can run your financial affairs from a smartphone.
FinTech is the term given to a new wave of startup technology companies challenging conventional ways of transacting business within the financial sector. FinTech being short for Financial Technology. Such banks are sometimes called neobanks.
In London, these companies are predominantly based in and around an area dubbed silicon roundabout.
Such companies are not confined to the United Kingdom. There’s some innovative thinking coming from overseas, too, some of it available to customers in the UK.
Open Banking Initiative
Open Banking is an initiative from the Competition and Markets Authority (CMA) to address issues around longer established banks not needing to compete hard enough for customers’ business that leaves customers with poor deals.
Open Banking uses APIs, or Application Programming Interfaces, in order to securely share customer data between different financial institutions. The CMA says:
- Open Banking will mean reliable, personalised financial advice, tailored to customers’ particular circumstances delivered securely and confidentially
- Open Banking will provide tailored advice banks and other financial service providers need to know how you use customers’ accounts
- Open Banking will use APIs to share customer information securely
- Third party providers will be able to use Open Banking APIs to see customer transaction information to help identify the best services available
You can read more about this at openbanking.org.uk
The future of FinTech is exciting. It is going to make significant changes to the way people conduct their financial affairs, the exciting beginnings of which we are starting to see.
For example, it is sensible to put a proportion of one’s money away into savings. This is often easier said than done.
FinTech is bringing a range of solutions to help you.
For example: round-ups. Supposing you spend £2.40 on a cup of coffee, the way that this works is to allocate the difference, 60 pence, to a savings account. Spend £28.15 and 85 pence is siphoned off for savings. Passive techniques, such as this, enable you to save decent sums of money quickly and easily.
At present, conducting an operation like this between two different organisations can only be done by sharing the login details of one bank with another.
This is not only a worrying prospect for many, it is most likely against the terms and conditions of the bank.
In January 2018, new legislation in the United Kingdom, in the form of The Payment Services Directive (PSD2), will make it mandatory for banks to share data with the consent of the customer.
This will be done securely via APIs that negate the need for the sharing of bank login credentials.
Similar legislation is being enacted across the European Community.
Important: this tutorial does not constitute financial advice. As with all investing, your capital is at risk. Investment products may not be right for everyone and tax rules may change in the future.
Always do your own research to ensure any product is right for your particular circumstances. If you’re unsure, you must seek independent financial advice. Envato Tuts+ does not accept liability if things go wrong.
Founded in 2014 by Anthony Thomson, the founder of Metro Bank, Atom is the UK’s first bank built exclusively for smartphone and tablet, the first to digital-only Bank to be granted a Banking licence and claims to be one of the fastest growing banking start-ups in Europe.
Atom Bank launched in 2016 with Fixed Saver accounts and mortgages. In April 2017, Atom announced the appointment of will.i.am as a strategic Board advisor to give an external perspective on culture, philanthropy and technology.
Atom is available in the United Kingdom and Germany.
Bud is not a bank, it’s a technology company founded in July 2015 in London. Bud combines data gathering and machine learning functions with world leading financial technology companies to help people do more with their money.
Bud enables people to link accounts in one place and get personalised insights from their financial data.
Bud is currently in beta and has around 10,000 people testing their technology.
Bunq was founded by Ali Niknam, a 34 year old entrepreneur and millionaire. Bunq aims to disrupt the banking industry with their own app.
Bunq makes it possible to transfer money, to other Bunq customers, without an IBAN number. The app uses telephone numbers or email addresses of bunq customers.
Unlike traditional banks, that are very formal, Bunq says it makes banking fun by allowing users to add pictures and emoji when transferring money.
With Bunq, which is developed in Netherlands, you can ‘go Dutch’, meaning you can split bills so that everyone pays their own share of the bill.
Bunq offers a free, a personal and a business account, the latter two with monthly fees. Bunq is currently available to customers in Germany, Netherlands and United Kingdom.
Chip is a savings account that intends to make saving effortless. It does this by using AI-powered algorithm (artificial intelligence) that calculates how much you can afford to save, and puts it away for you automatically.
Chip uses an app with a chat bot that can answer many queries and help you increase, decrease of pause the savings amounts. You can request to speak with a human at any time and the app is a really interesting way of saving money passively.
In just six months, for example, Chip calculated savings in excess of £600 for me.
You connect Chip to a current account and grant it read-only access. Details are protected using 256-bit bank-grade encryption.
Chip works with Barclays, HSBC, Santander, Lloyds, NatWest, Nationwide, RBS, TSB, Halifax, First Direct, Co-operative Bank and Metro Bank accounts.
Curve is a MasterCard that aggregates most debit and credit cards into one card. The advantage of this is that you only need to carry one plastic card and remember only one personal identification number (PIN).
You can choose which account is charged, be that the debit card on a personal savings or current account, a credit card or a business card.
Curve even allows you to change your mind up to 14 days following the transaction. You can freeze the card, to prevent spending, for security or in case of loss or theft. Everything is controlled in a smartphone app.
In the UK the majority of wills are made by solicitors or will-writing firms, with prices normally around £200-300 on the high street and £850-£5000s with established firms.
Farewill, a London-based Start-up founded in summer 2015 says it wants to be the global brand synonymous with death, offering simple, affordable ways of planning for death that are bold and positive, rather than shady and morbid.
And Farewill is challenging the traditional way of doing things. Whilst it does not have an app, Farewill provides an online will writing service for £50, or £85 for couples.
Fidor Bank is a German online bank founded in 2009 and active in the United Kingdom since 2015.
In the UK, Fidor Bank offers two products. A current account and savings bonds with terms between 3-36 months.
In July 2016 Fidor Bank was acquired by France's Groupe BPCE with Fidor Bank continuing to operate under its own brand.
Fidor offers a smartphone app, to keep track of one’s accounts, a digital MasterCard debit card and a physical MasterCard debit card. Fidor is available to customers in Germany and United Kingdom.
Flux is a fintech startup founded by ex-Revolut employees that is on a mission to make paper receipts obsolete.
The company has built a software platform to bridge the gap between the itemised receipt data captured by a merchant’s point-of-sale (POS) system and what little information typically shows up on a bank statement or mobile banking app.
Flux automagically links receipts to the bank card as you pay. Receipts are stored in the bank statement. Open up the bank app and you’ll find all the receipts as well as any loyalty points.
Flux’s first live integration is with EAT and Bel-Air, on the merchant side, and digital-only bank Monzo.
Folio is a Smartphone app that helps you automatically save small amounts of money, little by little, for specific goals.
Folio is aiming to make saving a fun, simple and personalised experience.
Folio automates savings for you and transfers them to an instant access savings account at Barclays PLC. It claims to be the first mobile-only savings account that you can create in minutes.
GoCardless is a UK Online Direct Debit provider, founded by Tom Blomfield, Matt Robinson and Hiroki Takeuchi, in January 2011.
GoCardless started out as a means to facilitate group payments by making it easier for groups of friends and small organisations to make payments between each other.
GoCardless enables businesses to automate payments, using direct debit, and make it effortless to receive payments from customers.
Notably, from GoCardless, co-founder Tom Blomfield went on to work as CTO at challenger bank Starling before leaving and establishing his own digital challenger bank Monzo.
It’s long been the case that banks had a customer for life if they captured them at a young age with a piggy bank, pencil case or football. Despite the seven-day current account switching service (CASS), there is still a great deal of inertia.
The opening up of, and ability to share, financial data is making an exciting future possible for the future of Banking, and much of that Banking is now possible from the smartphone in your pocket.