In recent years, a new type of bank has emerged – the mobile-only bank. As the name suggests, these banks operate entirely through mobile apps and have no physical branches. Some of the most well-known mobile banks include Chime, Varo, and Dave.
The rise in mobile banking has led many people to consider switching from traditional banks to these new digital-only options. In this blog post, we’ll look at the potential pros and cons of switching to a mobile-only bank so you can decide if it’s the right choice for you.
Key Takeaways
• Mobile banks offer higher interest rates on savings and lower or no fees compared to traditional banks.
• The mobile banking experience is seamless, with easy-to-use apps for deposits, payments, and budgeting.
• However, mobile banks have fewer product offerings and customer service relies on chatbots and online messaging.
• Mobile banking security is strong but risks remain if your phone is lost or hacked.
• Switching banks takes time and effort to update direct deposits, bill pays, and other settings.
Pros of Mobile-Only Banks
Higher Interest Rates on Savings
One of the biggest pros of using a mobile bank is that it tends to offer higher interest rates on savings accounts. For example, Chime offers a 0.50% APY on its savings account, over 4 times higher than the average traditional bank. This makes it easier to grow your money just by keeping it in your primary spending/savings account.
Lower or No Fees
Mobile banks aim to be affordable solutions so they have eliminated most common bank fees like monthly maintenance fees, overdraft fees, minimum balance fees, and ATM fees. Even better, some reimburse third-party ATM fees as well. This makes them an attractive option for those who want to avoid nickel-and-diming from traditional bank fees.
Seamless Mobile Banking Experience
As you’d expect, mobile banks have extremely user-friendly mobile apps. You can easily deposit checks by taking a photo, making peer-to-peer payments, setting savings goals, creating budgets, tracking spending, and more. Since account management is app-based, mobile banking provides convenience and simplicity.
Personal Finance Tools
In addition to basic banking services, many mobile bank apps provide personal finance tools to help you budget, save, and improve your financial health. They analyze your income, spending history, goals, and bills to provide customized money management. This makes managing your finances simpler.
Fast Account Opening
Opening an account with a mobile bank typically takes just minutes compared to the multi-day process of opening an account at a traditional bank. Signing up is easy since there are no physical documents to send and approval is often instant. This also makes them convenient options for travelers or those who move frequently.
Cons of Mobile-Only Banks
Limited Products
Mobile banks focus mainly on deposit accounts like checking and savings as well as basic payment services. They lack other products you may be used to from a traditional bank like mortgages, auto loans, investment accounts, credit cards, and insurance. Those with more complex banking needs may find the offerings too limited.
Reliance on Chatbots and Online Communication
Since they don’t have physical branches, mobile banks rely on chatbots, online messaging, and phone support for customer service. While convenient, this lacks human interaction and may be frustrating for those who prefer in-person support. Complex issues can be difficult to resolve through a chat window.
Security Concerns Without Branches
Mobile banking comes with the risk of losing access to your accounts if you lose your phone or it’s compromised by hackers. While mobile banks have sophisticated security and encryption in place, some argue that the lack of physical branches increases vulnerability.
Account Changes Can Take Effort
Switching banks means updating your direct deposits, automatic bill payments, external account links, and more. While mobile banks aim to make the transition easy, it still takes time and effort to switch over completely and ensure no disruptions to your finances. This is a consideration for those hesitating to make the change.
Bottom Line on Mobile Banks
The bottom line is mobile banks offer convenience, savings on fees, competitive interest rates, and excellent mobile experiences. For digitally-savvy users who don’t need extensive products or in-person support, they provide an attractive alternative to traditional banks. However, those who still rely heavily on physical branches or have more complex financial needs may find mobile banking insufficient to completely replace a traditional bank. Analyze your banking habits and financial situation to decide if switching makes sense for you.
How Mobile Banks Work
To better understand the pros and cons, let’s look at how mobile banks operate and differ from traditional banks. Mobile banks provide banking services entirely through mobile apps without any physical branch locations. They are digital-only banks that allow users to handle all their banking through a smartphone or tablet. Here are some key things to know about how mobile banks work:
• Account opening is done through the mobile app, not in person. You provide personal info like Social Security numbers through secure channels which are verified digitally.
• Deposits are made by taking photos of physical checks through the app. The money is available within minutes. Direct deposit and bank transfers are also options.
• Transfers and bill payments can be made through the app’s interface or by linking external bank account numbers. Scheduling recurring payments is easy.
• Debit cards are provided for purchases and ATM access. Transactions can be managed through the app. Some banks reimburse third-party ATM fees.
• Loans and credit cards are limited, but some mobile banks provide access to cash advances, lines of credit, or basic credit cards.
• Customer service is handled through in-app messaging with chatbots or human staff. Some banks also offer phone support.
• Security utilizes encryption, multi-factor authentication, biometrics like fingerprint logins, and automated monitoring to protect accounts.
• Interest rates on deposit accounts like savings are higher than traditional banks since mobile banks have lower overhead costs.
So in summary, mobile banks aim to provide all the key services of a traditional bank but through an intuitive and user-friendly mobile interface. They leverage technology to improve the banking experience.
Popular Mobile Banks
If you’re considering switching to mobile banking, these are some of the most popular all-mobile banks to look into:
Chime
Chime offers free checking and savings accounts with no monthly fees. Savings accounts earn 0.50% APY interest. Chime reimburses up to $200 per month in third-party ATM fees. The debit card and payments app make spending and transfers easy.
Varo
Varo offers high-yield savings and cash-back rewards on debit purchases. Varo has no minimum balance requirements or monthly fees but does require direct deposit. Custom budgeting and analytics tools help manage your finances.
Current
Current focuses on seamless payments between people. Users get a Visa debit card and access to an interest-earning checking account. Direct deposits post up to two days early. Third-party ATM fees are limited.
Dave
Dave aims to help users avoid overdrafts with up to $100 no-interest advances. The app helps track upcoming bills and has budgeting tools. Dave has no monthly fees and checking earns 0.1% APY.
MoneyLion
MoneyLion is a members-only digital bank that offers online checking, savings, and access to loans. Membership plans with monthly fees provide credit monitoring, cash advances, and investment opportunities.
There are plenty of options to consider if you’re interested in an all-mobile solution. Check out reviews and comparisons to find the right fit based on your banking needs and preferences.
Conclusion
Mobile-only banks provide a modern, digital alternative to traditional banking with robust mobile apps, high savings rates, and minimal fees. For those comfortable managing finances online, they offer convenience and excellent user experiences. However, they have limited products, lack human interaction for customer service, and involve security risks if phones are compromised.
Ultimately, determining if switching makes sense depends on your banking habits, financial needs, and willingness to adapt. But mobile banks are certainly an intriguing option that more and more people are adopting as their primary bank.