When I started University 10 years ago I quickly found myself losing track of a regular savings plan which left me feeling out of control. The situation was awful and whilst I just about got through, I vowed to myself that I would sort out my finances and never make the same mistake again. I decided that I needed to budget to get my finances back in shape (I am not alone, 1 in 3 people in the UK with less than £1,500 in the bank, and 15% of people have no savings at all. When the ONS issued Britain’s accounts in October 2018 the head of GDP, Rob Kent-Smith said that “households spent more than they received for an unprecedented nine quarters in a row”).
My first port of call was my bank to see if they had any budgeting tools, but none were available. A Google search revealed there was also nothing online either so I had no choice but to create my own budget calculator on a spreadsheet (you can download a copy of this here). I still use that spreadsheet today and over the years I’ve refined it, adding my short and long-term financial goals.
Rolling forward to today there are many challenger banks in the market like Monzo, Starling etc which has prompted me to review their propositions...
The actual process of opening an account could not be easier. Just have your driving licence or passport to hand! The card was delivered in the post a few days later (although I barely use a card nowadays). The app is really intuitive to use with an immediate preview of your recent transactions when you open the app (much like the interface of a traditional bank). I’d recommend connecting facial recognition.
Your options to add money are instant whether that is a free UK Bank Transfer, Salary or cheque (5-7 days).
Once you have money to work with you can start to use the ‘budgeting’ feature that Monzo calls ‘Pots’. The idea here is to create a pot of money that has a target attached like a holiday or house deposit. A pot must be a ‘savings pot’ to gain any interest, not that you will get much!
One downside to this is that you cannot pay a direct debit directly from a pot. So if you have a debit like a water bill that comes out every 6 months you will need to remember to transfer this back into your ‘current account’ if it is being put aside in a pot somewhere. The ease of use of pots is great.
Monzo assumes that you have set up your budget before using the app i.e. you know what you can afford to put into a pot and your cost of living vs income. This still does not solve the original problem that I faced and my spreadsheet solved. However since I have an understanding of this I can use the pots fairly effectively.
Very similar process to opening the account as Monzo with a slightly more professional interface. Logging in provides an initial view of transactions and a helpful ‘+’ button next to your balance to add more money to your account. You can transfer money in the same way as Monzo.
The Starling equivalent of a pot is called spaces. In spaces you then set up ‘goals’ which could be anything. You can also round up your spending into a goal which is a nice touch. The view of your goals is a tile format so you can easily view all at once, I really like this. At the top is a summary of how far you have reached toward your goal.
Direct debits are seperate which means if you want to put your long term direct debits into a goal then you need to remember to place it back into your current account. Perhaps an alarm would be helpful? This could be connected a lot better.
Just like Monzo, all of this assumes you have set a budget before using the app.
Revolut has a similar sign up process to both Starling & Monzo however the finance options are far greater. There is also the option to add your other bank accounts to the app which instantly makes this a more complete and useful option to see your overall finances.
The pot or spaces equivalent is called a ‘vault’. It is not as obvious to set up as a pot or space however it does have the ability to create a deadline (when you want to achieve your target by) and then a recurring transfer on a set frequency (i.e. monthly every time you get paid!). You can even do this with someone else too. This seems like a far superior savings process to Monzo and Starling (that automated transfer makes a huge difference).
As you start to transact your ‘analytics’ screen will provide similar feedback to Monzo and Starling. A nice graph and ability to customise budgets each month. You need historical transactions to start customising the different categories however which is fine if you are going to keep using the app!
Again, like Monzo and Starling you must know what you want your vault targets to be and how much you can put aside for a budget.
Revolut also brings in trading, donations, insurance (to name a few) that are incredibly useful but probably for a far more advanced user.
In summary, all of these market leading banks are incredibly easy to set up, use and understand. The help sections are really well thought through and the fact that their broader marketing puts personal finance on the agenda is ace. However...I still do not think they are solving the initial hurdle for most which is understanding their personal financial position and creating a budget. The websites do have a few blogs about budgeting however it takes a while to find them. At least an option to help create a budget would be an improvement and finally get me off my 10 year old spreadsheet (which still works and you can download/edit here)!
A recent report on Sifted shows that signups of digital banks are diving. If I was working at one of these I would certainly be using this opportunity to create lasting behaviour with my existing customers by coaching them through a budgeting exercise.