Everything is online these days – talking, shopping, even banking. But would you trust a bank with no high street branches or customer service phone line – in fact, no way to talk to a real person at all?

Fidor Bank is a German online-only bank launched in 2009, which entered the UK market last year. Despite having over 300,000 customers in Germany, it employs under 50 employees. Advice is given and received through an online ‘community’ of Fidor customers, sharing advice and helping each other with their problems. In true modern fashion, its interest rates are influenced by Facebook likes – the more it receives, the higher the rate will rise, up to a maximum of 0.5 percent AER.

Chief executive Matthias Kroner says:

“Our account is more like a marketplace than a closed box current account, it is a social community with a banking licence, it is a peer-to-peer economy. It’s a marketplace, shielded by a banking licence.”

In January it launched a contactless debit card for its current account, but ut only the first three ATM withdrawals are free. After that, there is a £1 per withdrawal charge, whether the card is used in the UK or overseas. There is also a 1.5% foreign exchange fee on all non-sterling transactions, including cash machine withdrawals.

The most recent online challenger bank to enter the UK market is Atom, whose chairman is the co-founder of Britain’s newest high-street bank Metro. It was granted a license less than a year ago to become the UK’s first digital-only lender, and its investors include star fund manager Neil Woodford and venture capitalist Jon Moulton, as well as Goldman Sachs asset manager Jim O’Neill.

Unlike Fidor, Atom bank doesn’t even have online banking; everything is done through the mobile app, including mortgage applications and unsecured personal lending.

“Mobile banking has overtaken branches, telephones and even internet transactions,” Mr Thomson said.

“We have no branches, no legacy costs, no legacy IT systems or legacy balance sheet.”

In fact, Thomson believes that customers are happier with less contact with their bank.

“Customers who have less contact – face-to-face or voice-to-voice – with their banks are, surprise, surprise, most content,” he added.

So far, its too early to tell for these banks just how well UK consumers will adapt to banking solely online; however, its clear that as with everything else, the internet is the future – and traditional banks will need to adapt faster in order to compete against the rise of start-up challengers.

Miranda Wadham on 28/04/2016
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