New digital banks could provide an option for people living in France affected by Brexit’s impact on banking.
With certain British banks now closing, or considering closing, some accounts of customers who live abroad in the EU, opening an account with one of these digital ‘neobanks’ could be an alternative.
Sometimes called challenger banks, 'neobanks' are financial services that do not have physical premises and work mainly over internet / a mobile phone app and some offer the chance to have a UK-based account.
They are usually simple to open, many do not require an address, and they provide some of the same services as traditional banks, such as standing orders, receiving wages or pensions.
They do not offer such a wide range of different products as a traditional bank does, with many of them focusing on current accounts and payment cards, although some other products such as ‘premium’ accounts with extra features may be on offer.
Also some media have this year noted many of these banks are struggling to make a profit and The Financial Times recently stated that they have yet to prove they are as reliable as a traditional bank, with complaints about several major neobanks rising this year.
Here we look at some of the leading challenger banks and outline the pros and cons.
Revolut, launched in 2015, is probably the most well-known challenger bank. It has 2.5million customers including 1.1million in the UK.
A spokesperson for the company told The Connexion: “Our main advantages over our competitors are that we will be able to continue serving both our UK and European customers post Brexit and that we offer a wider range of services.
“For example with our multi-currency accounts, Revolut customers in France can benefit from access to sterling accounts, as well as 30 other currencies, and the ability to exchange money in-app and spend abroad at the real exchange rate.”
Like the other challenger banks, Revolut uses an easy-to-use phone app, where customers can manage their finances. It is very user-friendly, and gives customers an easy breakdown of how they are spending their money, with charts to highlight expenses.
There are also useful features, such as a setting that rounds up any expenditures, putting the extra into a “saving account”.
Revolut has a free account version that lets cardholders transfer or exchange up to £5,000/€6,000 per month (with a fee of 0.5% after) and allows free ATM withdrawals in Europe and the UK up to £200, then 2% after. This 0.5% rate increases to 1% on weekends.
Revolut can be used to set up standing orders and receive salaries or pensions in the UK or France.
Several Connexion readers recommended using Revolut, with one calling it “great”.
Another, however, said they “wouldn’t recommend Revolut.”
“They freeze your account as and when they feel like it, especially if you make too many transfers in a short space of time, then it’s hell to have the account activated again.”
Another downside is that, unlike Monzo and Starling, two other UK-based challenger banks, Revolut is not authorised by the UK’s Financial Services Compensation Scheme (FSCS) as traditional high street banks are. This service protects customers’ money in case of a bank defaulting.
A spokesperson for Revolut said: “As per our regulatory obligations, Revolut ensures that the money of customers is “safeguarded” under the relevant EU regimes.
“In the unlikely event of our default, customers’ funds would be protected and paid out in priority to creditors. Protecting customer funds is of the utmost importance to us.”
Revolut recently obtained a banking licence in Lithuania in order to allow it to keep serving EU customers post Brexit and reports that it is migrating their accounts to this eastern European country.
It states that the main effect will be a change in the IBAN number used to make international transfers, which will start with LT rather than GB and its customers are being advised to let recipients of direct debit money or regular transfers know of this change.
Other than that Revolut says customers’ ‘local details’ such as sort code and account number will not change.
The old British IBANs will still function until June 30, 2021 but using them may incur extra fees from European banks next year, Revolut says.
TransferWise is a UK-based company that launched in 2011 and has over 9 million customers.
It allows users to hold and convert 54 currencies at the real-time exchange rate, and to have accounts based in different countries, including the UK, US, Australia, New Zealand and importantly, all of the EU.
“That means you can send, spend and save money like a local, as well as getting paid around the world with zero fees, as if you lived there,” a spokesperson for the company told The Connexion.
“Opening a bank account abroad is incredibly difficult without a local proof of address. For expats, freelancers, small businesses and anyone else managing money between countries, our multi-currency account is invaluable.
“The card has a smart currency selector tool that automatically selects the right currency to pull your money from. If you are paying for something in pounds, but do not currently hold pounds, the tool will select the currency on which you pay the lowest fee,” the spokesperson said.
It is possible to set up direct debits and receive salaries or pensions in the UK and France.
A Connexion reader commented, “we can strongly recommend TransferWise. You can keep wallets of many different currencies and get live exchange rate prices. We use it a lot and have been very satisfied with it.”
TransferWise is fully authorised by the UK’s Financial Conduct Authority (FCA) in the UK and under the National Bank of Belgium in the EU.
This means that the business is subject to European rules (e.g. the Payment Services Directive) designed to protect customers who use payment services.
Monese was launched in 2015 in the UK and claims to have millions of customers from around 30 countries.
It is not necessary to have an address to set up an account.
Monese divides its clients into two regions, the UK and the rest of the EU. So it depends if you want to have a UK IBAN or a French one. In either case, you can hold money in euros and/or pounds, and transfer money between these currencies instantly and for free.
A spokesperson for Monese told The Connexion: “Traditional banking services will always be crucial (direct debits, standing orders, transfers, etc). The difference is we can make these traditional products and services more accessible, affordable, and collaborate with best-in-class partners.”
“Monese is particularly meeting a real need for those whose financial lives cross borders. Most banks act as though people still live in one country all their lives – and the way they are set up doesn’t just penalise people who want to travel for work, study or family reasons; even holidaymakers are hit by a raft of fees and charges, many of which they are not aware of.
“This is one of the biggest blind spots of mainstream banks. They have simply failed to keep pace with their customers’ needs.”
Like Revolut, Monese has one free account option and two paid options.
The free option gets customers free ATM withdrawals up to £200, and then a 2% fee after and free card payments in the UK or France, or any other EU country.
Also like Revolut, TransferWise, Monese is regulated by the FCA in the UK. This will continue to be the case after the Brexit transition period ends on January 1, 2021.
If you opt for a French Monese account, your account will be regulated by the National Bank of Belgium and customer funds are ring-fenced and safeguarded in EU bank accounts.
The biggest downside to Monese is transferring money to non-Monese accounts. The free account has a 2% payment on any bank transfers to non-Monese accounts, and a minimum payment of £2.
The premium account, that costs £14.95 or €14.95 per month allows for free transfers to non-Monese accounts.
There are many other challenger bank options, such as Monzo and Starling. Both of these require a British address to set up. There is also the German company N26, although this closed UK operations earlier in 2020 due to Brexit.
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