Banking, like almost every other aspect of our lives, has been transformed by recent advances in technology. From the rise of virtual crypto currencies and the vast number of potential applications of the blockchain technology that underlies them, through to the convenience of mobile banking, the days of traditional bricks and mortar finance can seem like ancient history.

Of course, physical banks still exist, and many people still prefer the human interaction that traditional banks can offer through their high street branches. Even so, many services – whether it is paying someone or transferring money between your personal accounts – can now be done online. Most high street banks now offer their own smartphone app and online banking facility, and branches are closing at a remarkable rate. Even many of those traditional in-branch activities – such as paying in a cheque – can now also be done at a digital kiosk within the branch, with no need for human interaction.

The rise of digital-only

An interesting by-product of the digitalisation of the banking industry is that we are now increasingly seeing how technology is bringing transformative new operating models onto the market. Online only banks like Starling, Atom or Monzo are a part of this phenomenon – but what exactly are they, and what are the pros and cons of this new way of banking?

Essentially, digital only banks like Monzo or Starling are financial institutions that have completely abandoned having any physical presence on the high street. Their apps differ from the apps of traditional banks because they represent pretty much the only way for their customers to interact with them – every aspect of your banking experience with them is via the app. So, is this a good thing or a bad thing?

Well, one clear consequence of this is that good app design and usability is everything – a traditional bank like HSBC or Barclays can probably get away with having a poorly designed app for a while, because their entire business model doesn’t depend on it. However banks that are completely digital should have a compellingly well-designed app – it is, after all, their unique selling point over the traditional operators.

More often than not this is the case, and digital only banks usually get it right, because the apps have been designed from the ground up to stand alone. The bank is designed to work around an intuitive and easy-to-use app, rather than the opposite. So, usability (compared to the app solutions of traditional banks) should be a big pro. It’s also clear that you’ll see more innovative features in the apps of online only banks, as they try to creatively differentiate themselves from the high street banks.

Convenience is king

Instant accessibility is a big plus for digital only banks too. With all of your account information in the palm of your hand, you’ll be able to enjoy features such as real time spending notifications, 24/7 in-app support (no more branch closing times to worry about), and the ability to freeze and unfreeze cards instantly if you think they’ve been lost or stolen. Because of this kind of instant access and real time monitoring we have found that digital only banks are often a great budgeting tool. They make it incredibly easy to see what you are spending and where, and some even have nice investment features such as round-ups to help you contribute to your savings day-to-day.

So what about the cons? Well, clearly anything that relies on mobile phone technology or an internet connection is vulnerable to the kinds of technical glitches we’re used to experiencing online. Websites can go down, connections drop out and apps can be buggy. The consequence of this can be that if there is a technical problem it can completely cripple your ability to manage your money, even if only for a short time. With no branches to walk into you can be left feeling helpless – and regretful that you can’t simply talk to a real person, face-to-face, to sort your problem.

All that said, the speed that traditional banks are now adopting so many of the technical innovations of online only banks suggests that they are doing something right. How they develop further in the future is going to be fascinating to see.