9 Best Challenger Banks in Europe for 2021
In the past few years, digital challenger banks have cropped up and are now challenging the conventional banking sector’s assumed monopoly in the industry.
These start-ups are all about raising the bar in customer service, convenience in deposits and loan application, and automation of several financial services like bill payments.
Challenger banks have made it possible to transfer cash locally and internationally for free, split bills, get real-time notifications, and also made spending and ATM withdrawals during international travels inexpensive.
In an industry where every challenger bank claims to offer the best services, how do you tell between a legitimate and illegitimate digital banker? In a bid to help match you with a challenger bank that best addresses your financial service needs, we have tested and came up with a list of what we consider the 9 best challenger banks for 2021.
What are Challenger Banks?
Ideally, this refers to a small to medium-sized enterprise with a digital-first approach to service delivery that is operating in the banking and finance industry. Challenger banks are primarily app-based banking setups that have for the past few years been challenging the long-established banks and giving them a run for their money in customer acquisition.
Even without the legacy systems and limited infrastructures, challenger banks have leveraged technological innovations to achieve a national and a global outlook for a fraction of cost and time it took the traditional banks. They are now going after what most experts consider the under-served markets that most banks long neglected as a means of carving out a niche in the lucrative finance industry.
What are the Pros and Cons of Challenger Banks over Conventional Banks
What Criteria Have We Used in our Rankings?
- Account opening process
- Products and services offered
- Security measures
- Fees and charges
- Extended services like issuance of Debit cards
- Customer support
- Security of deposit
- Foreign exchange conversion rates
The 9 Best Challenger Banks in 2021:
1. Revolut - Best for Card Control
Revolut debuted in 2015 and has since attracted over 2 million members. Despite its huge reported losses, the bank boasts of an elegant, streamlined app that helps in providing progressive banking. Revolut is, however, currently only available in Europe.
Revolt is out to extend and break the barriers to challenger banks. It has particularly set itself apart and is a few paces ahead of the competition with its highly flexible accounts and free international cash transfers. Additionally, you can make fee-free transactions globally, making it the most suited for expatriates who need to send cash home regularly, international students as well as individuals that are always travelling internationally.
Opening an account here is quite straightforward; it all starts by downloading the Revolut app and keying in your personal details after which you will be furnished with a UK account number and sort code. Some of Revolut’s other unique features availed to their premium customers include overseas medical insurance, priority customer support, access to 5 cryptos, lounge key pass access and a host of other goodies that are not availed to the standard package.
- Fee-free international cash transfers to over to 25 countries at the current interbank exchange rates
- Can hold balances in up to 16 global base currencies
- Gives you absolute control over card where you can freeze and unfreeze or send monthly spending limits
- Revolut applies unspecified markup during the weekends to foreign currency transactions
- Any transaction that exceeds $6,500 per month attract a 0.5% fee
2. N26 - Best Overall
N26 is a German based digital-first challenger bank that has over the years found its way throughout Europe. Although the challenger bank has found itself in the government’s cross-hair for not implementing sound systems to curb money laundering, it is still leading the pack in revolutionizing this sector.
It tops our list as one of the best challenger banks for the year not just because of its expansive regional reach but also due to its wide stock of banking features. You can access it from any European Union country and it has been specially designed to address the ease of sending and saving money.
Key among its unique range of features is the fee-free transactions when you use their card to make transactions from any part of the world. The app won’t even charge conversion fees when you pay using different currencies, making it the best for frequent international travellers. In addition to this, the challenger bank is accessible though a slick mobile app that gives you absolute control over your N26 account and debit card.
You can, for instance, lock and unlock the card, set the expenditure limit and also change the pin within the app and without contacting customer support. Here, you can open a free basic current account, or the premium N26 Black and N26 Metal and have your card delivered in between 5 and 7 business days. With a premium package, you will enjoy such features as free payments in any currency, Allianz insurance cover as well as free withdrawals worldwide.
- Provides instant cash transfers to other N26 account holders and within two days for non-N26 accounts
- Your challenger banks account may be online but it still provides you with a valid account number and a sort code
- Allowing for the creation of goal-oriented saving sub-accounts within the app
- Foreign ATM withdrawals attract a 1.7% charge
- No physical branches
3. Monese - Best for Free Direct Debits
Monese bank describes itself as the ultimate solution to the unhealthy bureaucracies that have been dogging the financial sector for ages. It seeks to provide a ‘true’ digital banking experience, away from the traditional branches and their rigid operations.
This is achieved by making Monese available to anybody within continental Europe by not requesting for proof of address during account registration or pulling out your credit report. This makes it suitable for anyone residing in the over 20 countries making up the European economic area.
You only need to download the challenger banks app and open either the free current account or choose between the two premium options referred to as Middle tier and unlimited tier accounts with a management fee of £4.95 and £14.95 per month respectively.
Some of the perks of opening the account include the freedom to switch between your UK or European account from the app seamlessly, near-absolute control over your debit card and automated bill payment features. Cash withdrawals for the free account are charged at £1 per transaction while the premium account grants you six free withdrawals per month. Exchange rates for two are billed at 2% and 0.5% respectively.
- It provides free direct debits
- Issues debit cards to account holders
- Free local and international money transfers
- Cash withdrawals attract a fee of £1
- Charges for the post office and pay-point deposits
4. Starling - Best for Goal-Oriented Savings
Sterling bank can be best described as a digital piggy bank that was specially designed for individuals looking to get in sync with their spending. It seeks to provide you with 'the best personal current account in the world' specially tuned to help you manage your finances. This implies that it will regularly furnish you with an automated report detailing your expenses and tips on how you can maximize your savings.
Other ways in which the Starling bank stands out include its attractive interest rates on deposits at the rate of 0.5% for balances below £2,000 and 0.25% for those below £85,000. It also allows for goal savings account creation where you can deposit cash manually or automatically. Additionally, the challenger bank will advance you an overdraft facility for eligible accounts or a fixed-rate starling loan.
- Goal-oriented savings feature
- FCA and PRA licensed and deposits protected by FSCS
- Fast and easy account opening
- Interests rates lower compared to traditional banks
- Easy access to overdrafts and loans may be viewed as an incentive to overspend
5. Monzo - Best for Tracking Expenses
If you are looking to manage your cash by understanding how you spend your balances to the last coin, you will need the Monzo Bank app and their contactless hot coral debit card.
This challenger banks break down your expenses into twelve categories and keeps tabs on your expenses for each category accordingly. It also stands out from the competition as their current account is accessible to anyone above 16 years. Additionally, it allows for the creation of a separate joint account for existing Monzo account holders.
Interesting Monzo digital bank features include the fact that it provides for fee-free international transactions and ATM withdrawals of up to £200 per month with additional withdrawals attracting a 3% charge. It also offers customized overdrafts to eligible clients with the option of switching off this feature or reducing the overdraft limit within the app. Cash withdrawals and payments in the U.K are free of charge.
- Total control over debit card in the app
- Avails overdraft services to outstanding account holders
- You don’t need a credit check to open an account
- Has a daily ATM withdrawal in the UK that currently stands at £400
- Charges 3% for international ATM withdrawals for amounts above the £200 limit
6. Atom Bank - Best for Fixed-Term Deposits
The primary difference between Atom Bank and most other digital apps is their approach to money management and savings. While most challenger banks are competing with the traditional banks in offering more flexible current accounts, Atom is targeting long term savings and mortgage services.
The digital banker is so bent on offering long term savings that it doesn’t even provide a debit card for their account, and deposits have to be through bank transfers. The fact that Atom is not a current account implies that you cannot use it for day to day transactions.
Atom digital bank has some of the higher interest rates on savings of all the challenger banks that we have examined so far. It allows for the creation of a goal savings account and the interest rates awarded for each are dependent on such factors as the amount saved and the time limit. You can, however, expect 1% for 3 month fixed savings account and up to 2.3% for a year fixed savings deposit.
- PRA and FCA certified
- Personalized bank account
- Highly secured to keep your money and banking information safe
- It does not issue a debit card
- You still need a traditional bank for full money management
7. Tandem - Best for Budgeting
Tandem can be best described as a companion or monitor to your accounts and stands out from the rest of the current account oriented digital apps in several ways. For instance, instead of using the app to create a new account, Tandem embeds itself on your existing current account.
Additionally, you can link multiple bank accounts to the Tandem app for easy management. Instead of issuing you with a prepaid debit card, it provides you with Tandem Cashback credit card or a Tandem Journey credit card.
The app is more of a financial management platform that harmonizes your expenditures allowing you to track your spending on different accounts. It collects data from the linked accounts and structures it into coherent expenditure reports that you can use to better understand your money management faults and how to improve on them. It will also use this data to calculate your credit card limit.
- Tracks spending and offers personalized money management advice
- Recommends cheaper services and products from reputable brands to help you save
- Eases the process of tracking different account expenses
- Credit cards increase the temptation to overspend thus defeating the goal of saving and cutting on expenses
- Doesn’t offer current account services
8. Curve - Best for Security of Deposits
Curve is specially designed to provide you with a unified platform where you can keep track of your expenses on different accounts. It is, therefore, best suited for individuals struggling to keep tabs with monthly expenses on different bank accounts.
Like Tandem, Curve makes it possible to link between different bank accounts and manage them from one app. Unlike the former that gives you a credit card however, Curve presents you a debit MasterCard that can be used to facilitate all current account transactions.
When using the Curve Mastercard, withdrawals, deposits and cash transfers are free. Spending and bill payment transactions abroad are also free during weekdays but are charged a mark-up fee of 0.5% during weekends and international holidays. There is also a limit for free international withdraws that are capped at £200 per month and extra withdrawals charged £2 or 2%.
Additionally, there is a limit as to how much you can spend or withdraw using the Curve card that currently stands at £2,000 and £200 per day.
- Harmonies your spending records for multiple accounts
- PRA and FCA registered and regulated
- You get 1% cashback on Curve card purchases from three online merchants of your choice
- Limited daily spend and withdrawals
- Imposes weekend markup fee on international spending
9. Yolt - Best for Intuitive User Interface
Yolt was launched in 2016 with the promise of bringing modern technologies and efficiency to the financial world. The Yolt app is engineered to enable you to have your banking data in your mobile phone securely, as well as, easily manage and keep track of your finances.
Yolt, unlike other challenger banks, is a third-party provider, pieced to an attractive app that helps you access financial information from your smartphone. Yolt combines your savings accounts, current accounts, and your credit cards to help you check balances from one point.
After analyzing your spending habits, it gives your advice, tips, and better credit deals. Being a third-party means, Yolt does not offer any cards or accounts. It only helps you access your financial data.
- Safe and secure
- Friendly user interface
- Offers guidance and tips on management of your finances
- You can only get access via a smartphone
Why should you consider opening an account with a challenger bank?
- They are convenient:
The fact that you have access to virtually every banking service on the go has proved to be the biggest win for the challenger banks. You no longer have to wait on the long banking floor queues as customer support if just a tap away. Plus they offer additional and highly unique features like freezing and unfreezing a card, as well as offering personalized savings and budget guidance.
- They are affordable:
A significant percentage of challenger banks and their services are online-based. This means lower overheads that they pass on to you in lower account management and transaction fees. This makes virtually all their services, from withdrawals to cash transfers cheaper than their high street counterparts.
- They are less bureaucratic:
Need a new debit card while overseas? Apply online and have it delivered in less than a week. Want to open a new bank account, save or apply for a loan? You don’t need to spend hours in a baking hall queue, just download the challenger bank app and fill in a request for the specific service at any time.
- They offer higher interest rates:
Inflation rates in the past few years have only condensed further. This has in effect seen interest offered by banks shrink below 1% and it is a matter of time before they hit sub-zero levels. Lower overheads and highly innovative credit facilities have however ensured that these challenger banks continue offering relatively higher interest on savings.
Glossary Of Banking TermsChecking Account
A Checking Account is typically an account held with a bank, which money can be deposited into and where checks can be drawn from.CD Rate
A CD or Certificate of Deposit is a savings account with a fixed rate and maturity date. This type of account is often dependent on keeping the money in the account for a fixed duration to realize the full advertised rate. The CD rate is the rate of return over the investment period.CD Ladders
A CD Ladder is where an investor splits a sum of money into equal amounts and places the funds into CD accounts with different maturity ratesJumbo CD Ladders
Jumbo CD Ladders are where and investor splits a sum of money across several CD accounts with different maturity dates. What make it a Jumbo CD ladder is that the sums of money invested are significantly higher. There is no official value at, which a CD becomes 'Jumbo' but it is generally assumed to be in excess of $100,000.Savings Accounts
Simply a bank account that earns interest.Money Market Accounts
A bank or credit union account that tracks the interest rates in money markets. They traditionally offer a higher interest rate than a regular savings account.
What are Challenger Banks?It's an established enterprise that provides bank services without high street branches or heavy legacy system. By penetrating the market, challenger banks are giving institutional financial banking a run for their money.
How Do They Differ from Traditional Banks?Typically, challenger banks are small enterprises that do not carry the legacy burden of traditional finance. Therefore, challenger banks run on digital platforms using high-tech and are highly adaptive.
Where are Challenger Banks Found?Today, over 100 challenger banks are cropping up everywhere. The emergence of cryptocurrency trading has infused the industry with added client energy, funding, and interest. The UK, in particular, is the hotbed of challenger banks. Thanks to centuries of banking infrastructure and the friendly start-up banking legislation in the United Kingdom.
What are the Consumers Expectations from Digital Banking App?Clients love the sense of control. The challenger banks have focused on mobile apps that make the consumer feel in-control.
What happens to my deposits should a challenger bank be declared bankrupt?When you’re choosing a challenger bank, ensure it is authorized by Prudential Regulation Authority (PRA) and regulated by Financial Conduct Authority(FCA). It means your deposits will get protected up to £85,000.
What are some of the banking sector’s driving forces?Unlike traditional banks, challenger banks have mastered the art of leveraging modern technologies. They have excelled in user experience since they have designed their systems with modern tech, from scratch. More transparency, lower fees, and quicker set-up are helping these banks attract and retain clients.
Are All Challenger Banks Digital-Based?Not really, while our list of the leading challenger banks pays more attention to the digital-first types of challengerbanks, they don’t necessarily have to be all online. Ideally, a challenger bank refers to any type of bank, online or otherwise that presents you with
Edith MuthoniView all posts by Edith Muthoni
Edith is an investment writer, trader, and personal finance coach specializing in investments advice around the fintech niche. Her fields of expertise include stocks, commodities, forex, indices, bonds, and cryptocurrency investments. She holds a Masters degree in Economics with years of experience as a banker-cum-investment analyst. She is currently the chief editor, learnbonds.com where she specializes in spotting investment opportunities in the emerging financial technology scene and coming up with practical strategies for their exploitation. She also helps her clients identify and take advantage of investment opportunities in the disruptive Fintech world.