Banking has been going through some significant changes in the past few years, with a number of ‘challenger’ banks emerging with a focus on convenience and technology. One of the best known of this new breed is Monzo. So, what is it and why should you consider moving your money from one of the traditional establishments to the new kid on the block?

Is Monzo a bank?

After starting out as a financial service called Mondo that allowed customers to load money onto a pre-paid debit-card and use an app to monitor their financial transactions, Monzo is now a fully-fledged bank with a license regulated by the Financial Conduct Authority (FCA) to operate in the UK. It’s also backed by the Financial Services Compensation Scheme (FSCA) which protects up to £85,000 of your money if the bank should encounter any problems.

This means Monzo can offer customers current, joint, teen, business and savings accounts, ISAs, loans and overdrafts, plus a number of innovative services all with the assurance that your finances are safe.

How does Monzo work?

As one of the new smart-banks, Monzo dispenses with physical branches and instead has a focus on its smartphone app and online customer service. This means you can discuss issues regarding your account 24/7 via its instant messaging system.

While the app remains the hub of the Monzo experience, accounts also come with a debit card to use in the physical world. This is backed by Mastercard, so you can use it almost anywhere around the globe for contactless payments or to withdraw cash from ATMs.

The app itself is available for Android and iOS and features an attractive design, with images and graphics livening up the boring old spreadsheet approach that banks have used for years. Instant notifications let you know when money has been paid into or out of your account, making it easy to keep track of your activities, and all transactions or

The interface includes sections for payments you’ve made and any scheduled to come out, plus you can use the Roundup feature to take all of those pennies left over in transactions and put them in your savings account. So, if you make a payment of £12.63 then £0.37 will makes its way to your piggy bank without you having to do anything at all.

You can also set specific savings targets, or Pots as Monzo calls them, complete with a picture so you can recognise them at a glance. These can be added to by the Roundup feature, with a monthly automated payment or simply whenever you want to pop a few quid in the jar. At the time of writing these also offered interest rates of up to 1.50% (AER, fixed) so your savings gets a little bonus.

One interesting feature in the Current account is being able to get your wages a day early. This works if you have them paid directly into your account via BACS. At 4pm on the day before its due to arrive in your account Monzo can free up the money and make it available to you. No fees, just your wages and the chance to spend them.

What accounts are available?

Monzo now offers a wide range of accounts to suit your needs. These include the following;

Current

These offer the features outlined above, as well as flexible overdrafts that you can arrange through the app. Set your limit, have it agreed, then you can dip in and out of it when the need arises. Fees are set at £0.50 for each day that the account is overdrawn by more than £20, with a monthly maximum of £15.50. You can also use the app to set up Direct Debits, standing orders or transfer cash to people, plus there is also full support for Google Pay and Apple Pay.

Alongside your wages being paid directly into the account, you can also deposit cheques through the post and cash at PayPoint outlets around the country (usually in newsagents). Cash costs £1 per transaction and is limited to between £5-£300 per deposit, with a maximum of £1000 allowed over a six-month period.

Joint

This requires that the two people in question already have standard Current accounts with Monzo. These can then be linked to create the new, joint account. You still retain your individual accounts and cards, but obviously they now affect each other. Joint account cards are issued with different designs so you can recognise them, and in the feed on your app it will show which of you has paid for each item.

16-17 Year Olds

If your younger ones want to open a current account, Monzo’s offering is a fine choice. It’s essentially the same as the full adult version – replete with app features, debit card and Google and Apple Pay compatibility – but there are a couple of sensible differences. Monzo blocks spending on gambling sites or similar services and there’s no overdraft available.

Savings

As we mentioned above, these include Pots where you can save for specific goals, the ability to set automated payments or use the Roundup feature, and a maximum 1.50% interest rate (AER, fixed rate).

Business

Those with small businesses should take a look at the account as it links directly into accounting software tools such as Xero and FreeAgent to track all your transactions. You can also grant access to the account for employees, directors, and even your accountant.

There are the same features as on the standard Current account, with Monzo promising the arrival of new capabilities in the near futures, including international payments, tax assistance, batch payments and others.

How do I open a Monzo account?

Gone are the days when you have to go to a branch and fill out reams of forms. With Monzo you download the Android or iOS app and go through a short setup process. This involves taking a picture of your driving license or passport, recording a short video stating your name (this is all kept private and secure), and filling in your address. When this is completed your details are verified by Monzo and you receive a notification shortly afterwards confirming that the account is up and running.

Of course, Monzo isn’t the only smart bank around, there’s also Starling, Atom, Revolut and several others that offer similar features, all-based around your smartphone. It seems that banking is about to get a lot more interesting.