The Future of Banking
16 May 2019How Apple Card, Revolut, Monzo & Starling are shaping the future
Apple
Apple Card, recently introduced during an Apple event, appears to be Apple’s attempt to enter the personal financial world of its clients, through a very modern approach. The Apple card is a new attempt at reinventing the credit card.
Apple Card came up with a lot of essential characteristics such as:
- It boasts no annual, late, international or over-the-limit fees
- No pin numbers are needed
- Provide a significant cashback system
A customer will be able to organise purchases into trends only by Syncing with iPhone’s Wallet app. Also, the Card uses Apple Maps to pinpoint just where the customer managed to spend their money.
Apple Card is set to be launched in the US before it’s introduced across Europe in a later stage. The Card’s minimal physical version is also ready, made from titanium and stripped of long strip numbers and CCV code.
It comes with a Daily Cash rewards scheme which is set to offers a generous 2% cashback when using Apple Pay with any purchase made using the card and 3% on any purchase made with Apple itself, including the App Store and Apple Music, with cash paid out daily (non-Apple Pay purchases get a lower rate of cashback of 1%). There’s also a 24/7 real time support, via text message for any account support.
A disadvantage is that Apple Card’s quoted interest rate, is fairly high, once it comes to paying off the tab that you’ll inevitably build up, with its APR hovering around the 13.24% to 24.24% mark, hefty compared to some mainstream credit cards. Even though, backed by Goldman Sachs and MasterCard, it’s not the first time the company involved into the world of personal finance, (Apple already offers a more traditional credit card via Barclaycard).
Apple Card certainly appears to be offering a new, modern approach, placing itself among a new breed of 21st century digital banking start-ups like Revolut, Starling and Monzo that are also aiming to shake up the way people handle their money and take on traditional high street banks.
The attempt is growing quickly in popularity, mainly among younger customers, which accounts are managed solely through mobile apps and websites. With no physical branches to worry about, they make for leaner operations which can offer current accounts with novel features, like fee-free spending abroad and the ability towards an instant, to temporarily block a debit card.
The crucial question how does Apple compare with the new wave of money services? Below, are the main players currently offering in this brave new world of banking in the UK, along with some of the advantages and disadvantages for each service.
Revolut
Revolut launched just four years ago. The rise of Revolut from a basic app to a genuine “challenger bank”, despite some recent negative coverage in the news, shows no signs of leaving the scenery with it’s now user base of over 3 million across Europe.
Key factor to its popularity has been a feature which allows customers to keep multiple currencies on one card simultaneously and convert between them seamlessly on their phones. This, together with free spending and withdrawals abroad has made it without doubt, popular for those who travel a lot and those who work away from home shores.
As soon as a customer signs up, gets an account number and a sort code to use for normal current account functionality such as receiving a salary and making regular payments.
Revolut uses the interbank exchange rate, which offers better foreign currency rates than most of its modern banking rivals, while its apps for both iOS and Android are snappy and easy to use, with useful budgeting tools, instant spending notifications, and the ability to instantly lock and unlock cards.
The service offers peer-to-peer loans, various types of insurance, and the ability to buy cryptocurrencies such as Bitcoin. There’s also a respectable range of security features for accounts, including the ability to block payments if are conducted out of the range of your phone’s GPS location.
Unlike European customers, UK local Revolut accounts do not currently have access to direct debits, limiting the service’s usefulness as a replacement for day-to-day current accounts, even if there is the promise of this being rectified soon. Deposits made with the service are not currently covered by the Financial Services Compensation Scheme. However, once Revolut application for a full banking license is approved, this service will be offered.
The cost to set up the first debit card, is £5 with a £6 charge for replacement cards. By accessing some banking features required, the customer can become a “Premium” member, which costs £6.99 per month (there is a limitation to withdrawing £200 per month in cash, with a regular account for free, after that there’s a 2pc charge).
Starling Bank
Starling launched in 2015, offering similar traditional banking services like Revolut. Starling boasts a layer of security as it holds a full banking licence, with accounts covered up to 85,000 by FSCS protection.
By offering a full current account that comes with a Mastercard debit card, Starling pays out a small, but welcome amount of interest on balances (0.5pc on the first £2,000 and then 0.2pc on anything up to £85,000). Through its 11,500 branches, for those who like to do things the old-school way, a recent tie up with the Post Office allows you to deposit and withdraw cash.
The Starling app’s functionality is similar to Revolut, with real-time notifications, the ability to split bills and instant freeze and unlocks on cards. Unauthorised overdraft charges are capped at a competitive £2 per month, but there’s currently no dedicated savings account offering.
Monzo
Similar to Starling, Monzo is a fully licensed bank so customer’s money is covered by the FSCS. Launched in 2015 as a pre-paid credit card and manage to offer a complete service that could fully replace most regular current accounts, together with the ability to set up direct debits and standing orders, split bills and instantly payments, with overdraft options also to be offered.
Monzo's key characteristic probably is its app’s spending tracker, which provides a forensic breakdown of how someone is spending hard-earned pennies, with notifications every time the card is used and the ability to set spending goals. The app gives an admonishing slap on the wrist, with reminders when they are overdoing it.
As there is fee-free spending abroad, there is a limit of £200 cash withdrawal of every 30 days while withdrawing outside of the UK, before a 3pc charge is added. It could be a short waiting time of a couple of days to join, while the 50p a day overdraft charges, soon could rack up for more care-free and easy-going customers.
