The digital banking ‘revolution’ that feels old school
New mobile banks ditch branches and instead live on your phone... but old habits die hard
Do you think the N26 is the main road from Foxford to Castlebar? And that a mobile bank is a big lorry that used to go around dispensing cash back in the day when banks actually cared about meeting their customers? If so, you’re probably not fully up to speed on the digital banking revolution.
Just to fill you in then… mobile apps are threatening to revolutionise banking. If you want to start a bank, you don’t have to buy impressive buildings all over Ireland. All you need is a phone app. Not surprisingly, hundreds of digital banks have sprung up globally, promising a banking revolution.
But before we get too carried away and march off to burn down our local branch let’s look a bit closer at these new banks.
Firstly, despite all the fuss only two have apparently reached Ireland – UK-based Revolut and a German outfit called N26, whose name, unfortunately, wasn’t inspired by a driving holiday in north Mayo.
N26 kicked off last year with 10,000 customers. Revolut has around 100,000 customers. Both are fully licensed banks and have lots of innovative offerings aimed at young ‘millennial’ customers.
Let’s have a brief look. First the good stuff. Revolut has a free account with foreign exchange at interbank rates and free bank transfers in 25 countries. You can make €200 worth of free withdrawals every month. If you pay €82 a year, you get a premium account, with free travel insurance, double the ATM withdrawals and 24/7 ‘customer support’.
N26’s account involves a subscription fee of €5.90 a month but this includes an insurance policy covering travel, health, mobile phone and cash theft. However, there is a €2 fee if you make more than five euro withdrawals a month while the fee for non-euro cash withdrawals is 1.7%, although this is lower than most banks.
So free banking is not realistic even in a banking ‘revolution’ unless you make very few transactions. Even virtual banks cost money to run and will charge customers something. Another big selling point with Revolut is a facility to ‘split the bill’ with fellow diners so each pays a different proportion with their cards.
It also offers daily travel insurance priced from 99c for European travel, €1.25 for the world and €1.50 for North America.
These are decent rates compared to some banks and paying by the day is a handy innovation. But, again, other digital ‘disrupters’ such as multitrip.com have been here already with slightly better deals.
You can get annual travel cover for €14 a year in Europe, which would work out cheaper unless you go abroad for less than two weeks a year, which seems an unlikely scenario for the globe-trotting millennials targeted by Revolut.
It’s easy to join Revolut via its app, which gives off a vibe that there will be lots of funky new features at some time in the future – just not quite yet. As these new banks don’t have the same resources as the old ones, a lot of the new offerings, it appears, will be ‘in partnership’ with other companies. This doesn’t suggest they will be the cheapest deals around as everyone will have to take a cut. However the jury is still out on that one.
Revolut’s latest feature was the facility to round up your purchases and put it in your ‘savings vault’.
For example, if you buy a cup of coffee for €2.79, the sum taken from your current account will be rounded up to €3 and put in your ‘vault’, as a cryptocurrency, if you want this option.
The scheme is clearly aimed at some millennials who don’t pay too much attention to details and will be impressed by the words ‘round up’ and ‘cryptocurrency’.
Some may get the impression that this is free money which will turn them into Bitcoin billionaires. Alas, this offer just looks like an ‘old school’ bank marketing gimmick to me. Firstly, there is no financial benefit here. Revolut isn’t giving you that 21c – it’s coming out of your
pocket. So why not just save a fiver or a tenner a week like people have been doing since banks were invented?
And why would you want to put your money in a notoriously volatile cryptocurrency such as Bitcoin, which has plummeted in value in recent months? (Although it’s up hugely since its inception.)
It sounds like they want to cash in on the fact that owning cryptocurrency is like a badge of honour to a millennial. And I couldn’t find a mention of an admittedly old-fashioned banking concept – interest.
When I tried to find out, I ran into another old banking tactic – getting the run around. The phone number given on the website for ‘help’ is only for cancelling your debit card.
When I went to the chat facility via the app, the automated adviser ‘Rita’ said ‘she’ didn’t understand my question (It wasn’t that hard, in all fairness: How much interest do you pay if any?)
Next came a very familiar message I’ve been getting from banks all my adult life: ‘We’re experiencing a high volume of requests due to overwhelming demand…’ So it turns out the bright new generation of banks are just as hard to get through to as the old. Banks do need a good kick up the pants and any increase in competition from Revolut and N26 is good news.
There is value to be had in some of their offerings, particularly transferring money abroad and currency exchange. But unless you’ r ea cryp to currency loving millennial who travels a lot and doesn’t want to deal with real people, the overall value and service proposition isn’t hugely different to traditional banks, at least so far. Don’t get too excited about the banking revolution yet. But it’s early days yet so watch this space.
PS: As we went to press, Revolut press office responded: ‘Customer support has been exceptionally busy this week due to an issue with a competition that we ran, but queues are now back to normal and the average response time is around five minutes.
‘In terms of our new savings feature Vaults, we do not give any interest at this time. However, it is something that we are considering.’