The way people bank in the UK has changed significantly over the past decade. App-based banks — often called digital banks, neobanks or challenger banks — have attracted millions of customers away from traditional high-street banks. Monzo, Starling and Chase (UK) are among the most prominent examples.
But digital banks are not right for everyone, and traditional banks are not as outdated as their critics suggest. This guide compares the two approaches to help you understand what each offers.
What are digital banks?
Digital banks operate exclusively through smartphone apps. They have no physical branches and handle almost all customer service through the app, in-app chat or phone. They were built from the ground up as technology companies that happen to hold banking licences, which means their apps tend to be more feature-rich and user-friendly than those of traditional banks.
Most major UK digital banks are fully regulated by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) and are covered by the Financial Services Compensation Scheme (FSCS) up to £85,000 per person — the same protection as traditional banks.
What are traditional banks?
Traditional banks — such as Barclays, HSBC, Lloyds, NatWest and Santander — have been operating for decades or centuries. They have extensive branch networks, telephone banking, online banking and mobile apps. They offer a broader range of products, including mortgages, overdrafts, savings accounts, investments and business banking, often under one roof.
Where digital banks tend to do better
App experience and features
Digital banks consistently receive higher ratings for their apps than traditional banks. Features such as instant spending notifications, automatic spending categorisation, savings pots, budgeting tools and easy international payments are typically more advanced and better designed in digital bank apps.
Overseas spending
Many digital banks allow you to spend abroad using the Mastercard or Visa exchange rate with no foreign transaction fees, at least up to a monthly limit. Traditional banks often charge fees for overseas card use, though this varies by account.
Speed of account opening
Opening a digital bank account typically takes minutes, using your smartphone camera to verify your identity. Traditional bank account applications can take longer, though many have improved significantly.
Customer support responsiveness
In-app chat support from digital banks is often faster than telephone queues at traditional banks, though the quality of support can vary.
Where traditional banks tend to do better
Range of products
Traditional banks offer a wider range of financial products, including mortgages, structured savings accounts, investment products, and business banking. While digital banks are expanding their product ranges, most traditional banks still offer more comprehensive coverage.
Branch access
If you regularly need to pay in cash, deposit cheques, handle complex banking tasks in person, or simply prefer face-to-face service, traditional banks with physical branches are the better option. Digital banks generally cannot accept cash deposits — though some allow cash deposits via Post Office branches or PayPoint locations, usually with limits.
Established track record
Traditional banks have operated through multiple economic cycles and financial crises. While digital banks are regulated and FSCS-protected, they have shorter operating histories.
Mortgages and complex lending
If you are looking for a mortgage or a significant personal loan, traditional banks typically offer more options and greater capacity for complex lending decisions.
Are digital banks safe?
Yes — provided they are UK-authorised. Major UK digital banks are authorised by the PRA and FCA and covered by FSCS protection up to £85,000. Before opening any account, check the FCA register (fca.org.uk/register) to confirm the bank is authorised.
Can you use both?
Many people use a digital bank account alongside a traditional bank account — for example, using a digital bank for day-to-day spending and app features while maintaining a traditional bank account for mortgage payments, savings or services that require a branch. There is no requirement to choose one or the other.