The UK's Best Challenger Banks 2023: Fees, Exchange Rates, Usability, Features, and More

By offering competitive pricing and slick, user-friendly web and mobile apps, a slew of so-called 'challenger banks' has burst onto the UK scene in recent years, attempting to dislodge traditional banks such as Barclays and HSBC from the top spot in the eyes of customers.

In 2023 — as both the popularity and the market share of these challenger banks continue to grow steadily — you may find yourself wondering which of the many options available offers the most comprehensive service to suit your needs. In this guide, we whittle down the top challenger banks in the UK fintech scene to only two significant contenders and explore which one might make sense for you.

How We Score Challenger Banks

To determine which challenger banks scored better than others within the UK market, we used a consumer-first framework to analyse several key factors.

To begin, we weighed several concrete metrics such as fees and rates, ease of use, credibility, service and coverage, transparency, and customer satisfaction to piece together a reliable all-around picture of which top challenger banks offer the savviest solutions in the UK.

Next, we explored these results and presented our findings in the form of a series of key takeaways that we believe you should know about the two challenger banks ranked highest.

While we ranked these challenger banks on an overall list, remember that this list does not mean that our choice for the UK's best challenger bank is necessarily the best choice for you. As you'll see, each service has its unique set of pros and cons that may be relevant to your situation — pros and cons you should be mindful of if you're looking to open an account with one of these challenger banks.

So, without further ado, let's go through our rankings for the top challenger banks in the UK in 2023:

2nd Best Challenger Bank: Monzo

Monzo has built up a distinguished service record in recent years as one of the oldest online-only challenger banks in the UK. In fact, since its founding in 2015, the bank has grown to serve over four million UK customers, many of whom make up a large and active support community online.

Monzo offers three different types of accounts:

• Monzo: The simple Monzo account has no monthly fee. ATM withdrawals are free up to £250 a month in EEA countries and the UK, and up to £200 a month in countries outside the EEA. After that, you’ll be charged 3%.
• Monzo Plus: This account costs £5 per month and offers interest of 1% AER on balances up to £2,000. You’ll get fee-free ATM withdrawals in EEA countries and the UK, but they are limited to £400 per month in non-EEA countries. Anything over is charged at 3%.
• Monzo Premium: This account costs £15 per month and pays interest of 1.50% AER on balances up to £2,000. ATM withdrawals in EEA countries and the UK are free, while withdrawals outside the EEA are free up to £600 each month. Anything over your allowance is charged at 3%.

Having some of the most competitive rates out there, opening a Monzo account and using it within the UK is completely free to do. However, it's only when you go abroad that you'll find yourself subject to a 3% fee on ATM withdrawals over £300 per month. In addition, you'll also be met with a £0.50 per day fee if your account falls into overdraft.

As of 30 October 2020, Monzo introduced a 3% fee on UK ATM withdrawals that exceed £250 per month. While travelling abroad, you’ll be allowed to withdraw up to £200 in cash for free every month, after which a 3% fee on each withdrawal will apply. In addition, Monzo will also be introducing a £5 fee to replace a lost Monzo card after 30 October 2020.

Regarding exchange rates, Monzo will offer you a good deal all-round. The online bank itself charges no additional exchange rate margins on the margins already levied by Mastercard. This means that the exchange rate margins you do end up paying will be relatively low, typically around 0.80% of the total transfer.

What's more, Monzo goes above and beyond to provide this information to you unambiguously and transparently on its website — to a much greater degree, in fact, than many banks, challenger banks, and currency exchange services do.

Best Challenger Bank: Starling Bank

Starling Bank is a fully-authorised bank in the UK that's well known for its fee-free current account. In fact, because this account is completely free and gives you access to an impressively complete range of financial services (including overdrafts, loans, joint accounts, spending insights, payment splitting, virtual cards, euro accounts, interest, etc.), we think Starling offers the best challenger bank in the UK — one we recommend as a complete replacement for an account at a high-street bank.

UK-based digital-only Starling Bank was founded by Anne Boden in 2014 and has gone from strength to strength in its bid to shake up the banking sector. Determined to embrace the sector’s technological changes, the neobank received its UK banking licence in 2016 and launched the UK’s first mobile-only current account in 2017.

Starling Bank is a bit of an all-rounder regarding the accounts on offer. As well as offering personal and joint accounts for adults, customers can also choose from a debit card for younger children and an account for teens. Businesses are also catered for, with the neobank offering a business account for limited companies, other registered businesses, and sole traders.

Account name: Personal Account

Potential costs: £20 per CHAPS transfer in the UK, 0.4% + £5.50 for international SWIFT transfers, £5 for a replacement debit card.

Noteworthy features: Saving Spaces, pension scheme, youth card, interest, overdraft.

Best Challenger Bank in the UK: Our Verdict

With all the nuts and bolts in place, you're likely wondering which challenger bank is the right choice for you. Well, in the end, that will depend on your unique personal circumstances:

Monzo: Best for Savings

Monzo is an excellent choice of online bank if you're looking to escape the high fees of traditional banks. This is especially the case if you spend most of your time within the UK and don't plan to use your bank card for travelling abroad. This is because Monzo offers no fees for regular card use within the country, making it an attractive option for UK nationals.

Starling Bank: Best All-Round

Though Monzo is a great option, if you're looking for the UK's best online bank of all, we firmly recommend Starling Bank. In our opinion, Starling combines the ease of online finances with the trust of institutional banking in a way unmatched by other British challenger banks. Plus, its current and savings accounts are almost entirely fee-free!

Other Worthy Mentions

In addition to the two challenger banks we explored above, we'd be remiss not to mention the following ones too:

Wise Account

Another option available to UK residents is Wise's Multi-Currency Account, which offers a fully-fledged multi-currency account in 10 global currencies (including in British pounds), a physical debit Mastercard, and an optional virtual Visa card. In addition, opening a Wise Multi-Currency Account allows users to take advantage of the following features and services:

• Local bank details in the US, Eurozone, UK, Australia, New Zealand, Singapore, Romania, Canada, Hungary, and Turkey;
• An account to hold up to 56 currencies;
• Access Wise's powerful money transfer service right from your existing account balance.

While not a challenger bank in the strict sense (Wise's primary offering is still international money transfers), the London-based fintech has been expanding its offering over the past several years to offer a multi-currency debit card, foreign currency bank details and other bank-like services. It seems likely that Wise will join the ranks of UK challenger banks in the not-too-distant future.

Pockit

Pockit is an interesting spending platform, and we recommend it as a simple prepaid card option to handle your everyday spending. However, we don't recommend Pockit as anything more than a handy personal finance tool alongside your ordinary bank account. This is because Pockit's service fees can run up surprisingly fast in addition to its functional limitations.

Read our full Pockit review to learn more.

Curve

Curve is an excellent spending option, one we recommend you consider if you have multiple bank cards you struggle to get a handle on. However, we don't recommend Curve for any other reason besides its nifty card management feature.

Read our full Curve review to learn more.

bunq

Bunq is worthwhile for people with an international lifestyle as it allows easy and low-cost spending and transfers overseas. However, with its fees and lack of British banking details, it might not be the best bet if you're looking for a good UK challenger bank.

See our full bunq review to learn more.

What About N26?

If you're familiar with the UK fintech scene or have done your homework on the best options for challenger banks in the country, you may wonder why N26 doesn't appear on our rankings.

Simply put, this is because the German digital bank announced in February 2020 that it would be dropping its business in the UK following the country's exit from the European Union.

As a result, the country's 200 thousand customers were required to change bank accounts by April that year, leaving the digital bank high and dry in the UK market. Therefore, despite the prominence of N26 as a challenger bank in the neighbouring EU, the service is no longer available to you as a customer in the UK.