Could the success of Monzo and Starling in the UK lead to a revolution?

Created in 2014 and 2015 respectively, Starling Bank and Monzo appear to be leading a monetary revolution in the UK. The two companies began as what we now define as UK challenger banks. UK challenger banks are exactly what it says on the tin: they’re challenging highstreet UK banks like dinosaur Natwest — the status quo of deposits, spending and savings —  by offering a digital alternative.

Challenger banks don’t have branches. They don’t high street stores where you can and speak to a cashier, discuss setting up a new savings account and cash in your cheques. Instead, they’re suggesting you can do all of this online, whether it’s online chats, instant, 5-minute online applications for an account and finally, a photograph of a cheque for a deposit.

The experience of using Monzo and Starling is summed up by its application process — you get a pretty good feeling of what they’re about by that alone. After typing in basic information such as your name and address, you simply take a picture of your ID, such as your passport. Once approved (presumably automated, because it’s usually in the same day), they send you the debit card for free in the post within a couple of working days.

Packaged nicely and set up on the mobile app within a couple of minutes, you simply type into your phone what you want your PIN number to be. From there, you can save money into different “spaces”, freeze your card if you lose it and set limits on your account. Best of all perhaps, you can view your physical card details on the virtual app — which is useful when purchasing things online when you don’t have your card on you.

You might be curious about the security of that, and so are a lot of people. Security is one thing that they’re yet to prove themselves on yet as it hasn’t been a long time in operation. There is fully functioning biometric security to access the app, such as a fingerprint. And they are both FCA regulated. However, having large amounts of money in there may not be good advice — the lack of a physical branch means that if your account gets frozen for example, or money has disappeared, you’re relying on using the telephone or email (in which you could, for all you know, get ignored).

Whilst this is a very real limitation when weighing up UK challenger banks vs traditional banks, it also plays into their hands. For day-to-day spending use and salary management, UK challenger banks are really setting the bar high. UK challenger banks are also offering better exchange rates, thus matching online money transfer websites and their attempts to utterly outcompete traditional banks’ horrendous international fees and rates.


Monzo vs Lloyds

First and foremost, something that is commonly complained about with traditional banks is the unnecessary fees. There are many reports of customers being charged £30 for being £2 overdrawn in their Lloyds account, whilst Monzo appears to see the long-term retention of customers as more important.

Lloyds, undoubtedly, are an incredibly reputable and safe company. There’s no denying that. But there’s no denying the FSCSs Government promise of backing lost deposits for customers either. As mentioned above, you’re exposed to the possibility of not being able to contact Monzo’s customer service team, unlike Lloyds who have a physical branch, but this doesn’t mean they will ignore you.

Many see that as the risk worth taking. The management and accessibility of Monzo far outperforms Lloyds. You can set up alerts that will automatically notify you if you’re spending money too quickly, for example. Likewise, it’s more social too. If you’re out for dinner with friends, splitting a bill just became incredibly easy (makes use of requesting money in a very fast, easy way).


Starling vs Lloyds

Starling has a similar advantage over Lloyds that monzo has: it’s faster to use, easier to use, there’s more features and there’s more innovation. Starling has a clean user interface with great functionality. You can split your money into different pots, which will not be accessed when paying with your chip and pin, whether it’s an ATM withdrawal or contactless shopping. These different pots can be named, have targets and you can even schedule payments into them (i.e. if you wanted to put £150 aside each month for a holiday).

You can review your previous spendings with automatic categorisation too, something that works better than Monzo’s even. You can see if you’re spending more than average this month on your shopping or utility and so on.

A serious limitation for Starling currently is the lack of paying in by a cheque feature. With many challenger banks, and even some traditional banks like Lloyds, you can take a photo of the cheque via the mobile app and it will process into your account. This feature is “coming soon” for Starling, but it’s been a long wait and there’s no date of arrival. This will leave Starling somewhat red faced — a digital bank that lacks an important feature that its 325-year old competitor Lloyds has.

Matt Di Vincere

Matt Di Vincere is a digital content specialist. His main expertise is in the comparison of products, and simplification of complex concept into digestible journalistic pieces. He serves as the main editor of for the past 3 years, and writes some of the content and the reviews, as well as provides guidance to other writers. He is a world affair and history fanatic, especially modern history.

Notify of

Inline Feedbacks
View all comments
Would love your thoughts, please comment.x