Blocking unwanted transfers, simpler cheque deposits and other ways banking apps can help manage your money

As challenger bank Monzo launches a new feature to undo accidental transactions, we explore the benefits of app-based banking.

Banking apps have been around for approximately 15 years, with RBS launching the world’s first fully serviced product in May 2011.

A decade and a half later, this technology now comes in a variety of shapes and sizes.

But despite the technology’s rapid growth, some Brits still prefer the comfort of popping into a local branch, often fearing they’ll lose access to their cash if the app goes down.

In this article, we delve into five ways banking apps could help you manage your money, as well as the possible drawbacks.

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1. Undo accidenal transfers

It’s safe to say that many of us have accidentally sent money to the wrong recipient when banking online or via an app.

In fact, research from online bank Monzo has revealed that Brits made more than £825 million in inadvertent transactions last year.

These mistakes were often due to simple 'fat-finger' typing errors.

For example, users may carelessly add an extra zero to their transfer amount.

This could leave them overdrawn or result in a failed transfer if there are insufficient funds in the account.

As such, 58% of Brits say that they would feel more confident using banking apps if they knew they could correct mistakes as soon as possible.

With this in mind, Monzo has launched an Undo Payments feature, which allows users to cancel a transaction before the money leaves their account.

You can choose a window of 10, 15, 30 or 60 seconds to reverse your instruction, with 15 seconds being the default.

If you have a conventional account without app-based or online banking, you’ll usually need to report accidental transactions over the phone.

As most of us know, waiting on hold with a bank’s customer service team can be a time-consuming process.

After you’ve spoken to an adviser, you’ll then need to wait for the recipient’s bank to reply, and hope you get your money back.

Equally worryingly, you may not receive any refund at all.

If you have sent money due to human error, your bank and the recipient could argue that you are responsible for your own negligence.

While this new feature won’t protect you in all cases, it could give you some breathing space if you quickly realise your mistake.

2. Simpler cheque deposits

If you’ve ever paid in a cheque in a bank branch, you're probably familiar with the long queues and time spent filling out paying-in slips.

However, most apps allow you to do this by simply taking a photo of the cheque with your smartphone.

This typically takes just a few minutes, and the funds are generally available within one to two working days.

Doing so can provide a lifeline if funds in your account are running low and you urgently need a cash injection.

Are there any potential downsides?

As with all technology, this system is helpful but not perfect.

For example, some cheques may not be eligible for mobile deposits, such as certain business funds, travellers’ cheques, or overseas payments.

Likewise, this feature may not be ideal for the less tech-savvy.

There are usually pretty strict requirements when taking a photo of the cheque, which could be tricky if you’re not a whizz with your smartphone.

3. Making automatic savings with minimal effort

Banking apps often include options to “round up” your spending and move the “spare change” into a dedicated savings account.

These features can be helpful if you struggle to put money aside, allowing you to build up small amounts over time with minimal effort.

Although several banks offer this tool, online bank Chase is a real standout in this area.

It lets you round up your spending to the nearest pound, automatically save the difference, and earn 5% AER on these funds.

4. Cheaper spending abroad

Several digital banks, such as Starling and First Direct, don’t charge for overseas card payments or cash withdrawals.

In contrast, high-street banks often apply a foreign transaction fee of 2 to 3%, plus additional charges for using a cash machine abroad.

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5. View your spending by category

App-based banking can also give you a clear picture of where your money is going each month.

Most providers sort your spending into categories such as “bills”, “groceries” or “dining out”.

This way, you can track your habits and identify any areas where you may need to economise.

Although it’s certainly possible to see this information without the help of an app, this tech can stop you from spending hours poring over bank statements.

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Are digital banks safe?

Most app-based banks are covered by the Financial Services Compensation Scheme (FSCS), making them no riskier than high-street institutions.

The FSCS protects a customer’s funds up to £85,000 per financial institution.

Nevertheless, the technology does bring potential concerns.

For example, Barclays suffered several IT outages at the beginning of this year, which unfortunately coincided with HMRC's Self-Assessment due date.

Although these incidents are rare, such glitches can leave users temporarily unable to access funds or make transactions.

It could therefore be wise to maintain more than one account to make sure you're covered in the event of an emergency.

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Have your say

So, are you ready to embrace the digital revolution, or do you still prefer the security of face-to-face banking?

Or perhaps the potential for downtime on apps makes you nervous.

We’d love to hear your thoughts in the comments below.