Find out about the benefits of a bank that lives in your smartphone.
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Banks are evolving in Australia, offering customers a whole new range of digital features aiming to make money management simpler and more convenient. A new type of bank is launching with a view that banking can be done entirely on your phone. These new institutions are referred to as mobile-only banks.
This guide will explain mobile-only banks, their features as well as their pros and cons, so that you can decide whether they are right for you.
What is a mobile-only bank?
Mobile-only banks are a new type of bank that are designed to be accessed from an app on your smartphone. Unlike traditional banks, there are no bank branches and usually no option of Internet banking via a desktop. They are also called digital banks or neobanks. In Australia, these banks started launching in 2018 with many more due to launch in 2019. The majority will only offer a few products, such as a transaction account, a savings account and a debit card, but all come with innovative features designed to make banking easier.
Compare mobile-only banks in Australia
How do they differ from online banks?
While mobile-only banks and online banks seem similar, there are a few key differences that set them apart.
- Access. Mobile-only banks are called as such because you can only access them through your smartphone or, sometimes, your tablet device. Other online banks such as ING and ME still offer Internet banking portals that you can access on your computer. They are "online banks" because they simply have no bank branches and you can access them online.
- Technology. Some online banks are part of larger international finance groups (ING) or using the infrastructure of big banks (UBank and NAB). Mobile-only banks may still partner with larger banks, but are usually building their own bank from the ground up to be able to be nimble with their products and features.
- Product offerings. Online banks such as ING, ME and UBank have been around for a lot longer than mobile-only banks and so have a more diverse product offering. For instance, ME offers bank accounts, home loans, credit cards and personal loans and ING has a similarly diverse offering. Mobile-only banks, for now, tend to only offer one or two products.
What are the features of mobile-only (digital) banks in Australia?
Features do differ between these new mobile-only banks, so it pays to compare, but you can expect to find any of the following:
- Spending insights and budgeting tools. Features such as automated spending categorisation, the option to set spending limits and detailed insights into your spending history are available.
- Travel benefits. Travel features include being able to hold multiple currencies in one account, no foreign transaction fees and no international ATM fees. Some also let you make international money transfers at the market exchange rate.
- Bill detection and automation. Some banks can automatically detect when you're manually paying a bill each month or when you have a direct debit being taken out regularly. It will then either allow you to automate the process and get the app to pay the bill for you or send you a reminder to make sure you have sufficient funds in your account for the direct debit.
- Easy payment splitting between friends. This is a common feature of mobile-only banks. You can send money to your contacts or request a payment. You can also split a bill between friends if you need to.
- Security. There are many innovative security features on offer including the ability to lock and unlock your card instantly if it's lost or stolen, 24/7 live chat assistance and location-based security, which means your card can't be used if you aren't near it.
Are mobile-only banks safe?
It's good sense, especially in the case of banks, to make sure that any new financial players in the market are going to keep your money safe. Here is what you need to know about mobile-only banks:
- Licensing: The reason these new banks are now popping up is that the Australian Prudential Regulatory Authority (APRA) has recently announced a new framework for banking entrants to be granted a restricted licence. So far, one bank (Volt Bank) has been granted this restricted Authorised Deposit-Taking Institution Licence. Other mobile-only banks are waiting for their licences to be granted or partnering with institutions that are already licenced in order to start offering products.
- Security features: Many mobile-only banks offer innovative security features. These include the ability to lock and unlock your card if it's stolen or lost.
- Contactable: Most mobile-only banks offer 24/7 live chat help within the app should you need assistance, and are easily contactable if you need help.
- Experience: While these banks are new, many of these companies have experienced banking professionals on their founding team. If you are uncertain about banking with a new bank, find the "About us" or "Our team" page on the bank's website to see what kind of experience it has.
Pros and cons of mobile-only banks: Decide if they are right for you
- Easily accessible. All of your banking products and services are accessible from your smartphone whenever you need them.
- Product design. These new digital banks leverage new technology to be able to respond to their customers' needs quickly. They usually have beta tests for products before they go live, so you can give your feedback as the product is being created.
- Competitive pricing. Similar to online banks, mobile-only banks have no physical branches and fewer overheads This allows them to keep products competitive.
- No Internet banking website. If you're one of the 47.1% of Australians that uses Internet banking*, then you may find mobile-only banks restricting. You will only have your smartphone or, in some cases, your tablet device, to complete all of your banking needs.
- Small range of products. Mobile-only banks are only just starting to launch their products, which means there isn't a wide suite available. If you're looking to do all of your banking with one institution, then a mobile-only bank may not be for you.
- Product limitations. Some mobile-only banks have restrictive ATM withdrawal limits or, in the case of prepaid card offerings, restrictive load limits. Check what limits and restrictions apply before you take out an account to make sure the account is right for you.
How to sign up for a mobile-only bank
The sign-up process for mobile-only banks differs depending on the individual bank, but most offer quite a fast and simple process. You will need one or two forms of identification, usually your driver's licence, Medicare card or passport, as well as your personal details such as your full name and address.
Before you sign up, check that the mobile-only bank is compatible with the device you have (iOS or Android). You can find out more about the sign-up process on Finder's digital bank review pages.
*Source: Roy Morgan. Data found that in the 6 months to October 2018, 47.1% of Australian bank customers used a website for Internet banking. Data based on a survey of over 50,000 Australians.
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