Ultimately, technology disrupts everything. Uber, Lyft and others have seriously unsettled the traditional cab industry and, eventually, will make it disappear. AirBnB did the same with apartment rentals and the hotel industry. This phenomenon has most certainly arrived to banking too. Here, I want to discuss what the digital banking revolution means, and explore digital banking alternatives for digital nomads.
Concretely, I want to talk about services like N26, Revolut, Monzo and Mona.co, based on my experiences.
Reasons Behind The Digital Banking Revolution
Companies like Uber or AirBnB exist for a reason. They greatly improved a service that was stagnated for many years, offering a better solution to an underserved market. If you have ever taken a traditional taxi or have spent the night at a disgusting hotel room, you know what I’m talking about.
Also, they allowed a whole new market to emerge in a more democratic scenario. Everybody can sign up to drive for Uber or rent one room or their entire house at AirBnB.
Some may argue this is not a good thing. However, in my humble opinion, democratizing a service is always positive if the right safety mechanisms are in place.
In my view, no industry is more obsolete and disconnected from the needs of the younger generations than the banking industry. Indeed, millennials not only don’t trust or even hate banks, but clearly reject home ownership and are pushing towards destroying the banking industry as we know it.
I think we all can agree that this is actually the banks’ fault. During the last decades, we’ve witnessed a completely disproportionate rise of the corporate capitalism greed and aggressiveness. The consequences shaped and defined the late 2000’s and early 2010’s, from the financial crisis and the Occupy Wall Street movement to Bitcoin and the emergence of cryptocurrencies.
Apart from the individual or personal disillusion of youngsters with the banking industry, there are also important ideological considerations. If you have the chance, I recommend you to watch the movie Requiem for the American Dream, where Noam Chomsky discusses on the deliberate concentration of wealth and power in the hands of a select few and its implications for our current and future economy.
Regardless of how much you agree or disagree with Mr. Chomsky, he makes some pretty good points here.
Traditional Banking And Digital Nomads
In Spain, I own an ING Direct account. When I decided to become a digital nomad and travel the world, I filled a form to inform the Spanish Tax Office that my tax residence was no longer in my home country.
Some days later, I received a furious email from my bank telling me that I needed to update my personal data, threatening me with closing my account if I failed to do so.
The fact that I had changed my tax residence was a real problem for them.
Indeed, the tone of the email seemed to indicate that I was about to start a money laundering business or finance Al-Qaeda.
Unfortunately, their web interface had a serious bug that prevented me to update my personal data. Their phone support couldn’t help me with that, so I was left to deal with their technical support via email.
Even though their website and App are hideous, ING Direct has a reputation of being the “online bank”. As a result, I was certainly expecting this experience to be a lot better. It actually took me two months sending documents and IDs back and forth via email to finally get to the conclusion that I was OK and my money was safe in their account.
However, this experience left me with a restless feeling. Needless to say, as a digital nomad, I didn’t want to go through this process every time I changed my location.
Enter The Digital Banking Revolution
By the time, TechHub -a startup community I am member of- received a pack of Revolut cards. Admittedly, I had not heard about them before, but I decided to pick one and do some research.
The card was associated to a service that allowed you to open bank accounts and operate them all with just that card. Everything was done via a mobile application. Having a look at this application, I got the same feeling that when I started my company in Estonia.
I felt like I had been living in the XIX century and suddenly had landed in the present day.
When I started to operate with the card, I realized how different the banking experience could be. Furthermore, it was clear that these guys where not worried about where do you live, or where do you pay your taxes. That’s your business, and your responsibility. No visits to the bank office to sign papers, no faxes, no bullshit.
Instead, you have a well-secured mobile app, digital signatures, immediate bank transfers, geographical independence, multiple accounts linked to your card, in multiple currencies, the ability to freeze and unfreeze your card with a single click…
This is the future. Especially for digital nomads.
It’s important to understand the difference between the two. Most traditional banks nowadays have some kind of digital presence. However, there’s a huge difference between a bank with one or two apps in the App Store and a digital banking solution.
How Do They Work?
All these services work very similarly.
They offer you a pre-paid card -usually a Mastercard- with an associated account. In some cases, these accounts have real IBANs and SWIFT codes like any traditional bank account. You can then top it up by transferring money from other accounts or making card payments.
Once topped up, you can use your pre-paid card mostly like you would use any other card: fee-free withdrawals at ATMs, online purchases, paying at restaurants and shops, paying at your favorite coffee shop, etc…
Due to the KYC (Know Your Customer) policy, all these services require you to identify yourself somehow. The process here is what really makes a difference between them. In my case, I decided to use my Latvian residency ID when registering. It’s a valid ID, and it’s issued in collaboration with the Spanish authorities. I wanted to find out how flexible these services were.
It’s important to understand that these cards are just prepaid cards, and the associated accounts are, thus, not traditional bank accounts. This means that you don’t have the deposit insurance and guarantee protections associated to traditional banks.
That said, Monzo accounts are already protected by UK’s Financial Services Compensation Scheme (FSCS). This means that your money is protected up to £85K. Revolut has applied for an European Banking License. This is big deal, because if granted, they will be a full bank and your account will be protected with 100K € thanks to the European Deposit Protection Scheme (EDPS).
Digital Banking Alternatives
Thus, without further ado, let me describe the alternatives that I have tried for digital banking.
As I described, Revolut was the first digital banking service I tried. The sign up process is pretty straightforward. You install the App, sign up, and then are offered to activate your pre-paid card. The card is wireless, which is very nice.
Probably the fact that I had access to the card beforehand has made the process a lot easier. However, you can easily get one delivered to you for 5-6€ (depending on where you live). No waiting queue.
In the case of Revolut, the KYC registration process was completely frictionless. I was able to do everything within the app in matter of minutes.
First, I had to fill some personal information, like my name, country of residence, nationality, etc. Then I had to upload a photo of my ID. Finally, I was required to upload a document that probed that I was living in the residence I specified.
Revolut had no problem whatsoever with my Latvian Residence ID. Just an hour later, I topped it up assigning myself a salary from my Estonian company and started to test it on restaurants, ATMs, etc…
Another absolute pro for the Revolut card is the fact that you can open a virtual bank account (with valid IBAN and SWIFT numbers) for every currency. Then, you can top up every account with money from every currency and transfer it between them, fee-free. In my case, I have accounts for US dollars, Euros and British Pounds, all associated to my Revolut pre-paid card.
Last, but not least, they offer a premium tier that has a very interesting overseas medical insurance service. I think this is very interesting for digital nomads, and it’s definitely something I’m really interested in.
Monzo is similar to Revolut, but it’s UK-based, and offers you a UK current account. As a result, your money is in British Pounds. This is one of its main drawbacks for me. If you aspire to replace traditional banking with a digital solution, you cannot restrict yourself to the UK, specially with the Brexit.
One of the main advantages of Monzo is that they offer full FSCS protection, meaning that your money is safe up to £85K.
The registration and KYC process was easy and smooth in my opinion. My only gripe is that once registered, you have to top your card up to 100 pounds. Conversely, Revolut lets you start with virtually no money for as long as you want.
N26 is a German startup offering digital banking services. I think they were one of the very first players in the arena. They actually have the banking license.
Unfortunately, I can’t recommend N26. Actually, I currently don’t own a N26 account. The registration process was so awkward and cumbersome that I opted for better, more user friendly alternatives like Revolut.
Their initial registration form required more information. This process felt very similar to opening a traditional bank account for me, only even more uncomfortable because I had to type everything in a small smartphone keyboard.
However, after filling all the data and sending your mandatory ID and residence permits, you have to go through a video-conference interview with the N26 staff. To make things worse, you cannot do it right away, you have to wait until there’s someone available to conduct the interview.
I’m usually busy at work, so I don’t have time to wait until someone contacts me via a push notification for an interview. I normally schedule meetings with my customers, so I would expect the same from N26. Of course, the interview itself makes you loose even more time.
In my case, it was a complete disappointment. I went through all the ridiculous interview process, patiently answering the interviewer’s questions, and holding my ID in front of my face in multiple positions to be photographed. It actually felt more like an interrogation than opening a bank account.
Finally, some days after the interview, I received an email saying that I had to repeat the interview because I had shown a Latvian Residency ID during the interview but I had Spanish nationality. This for me was a clear indication that N26 is not the best choice for digital nomads. I removed the App that same day.
Mona.co is a very interesting digital banking service. They are not just a pre-paid card, but also a cryptocurrency platform. Thus, there’s a token-based coin, called “Monaco”, and you can buy, sell and trade it for fiat currency or other cryptocurrencies like Bitcoin or Ethereum.
They have different cards, from the basic one (Midnight blue) to most premium one (Obsidian black). Except for the Midnight Blue, the rest of the cards require an investment in the Monaco coin. Interestingly enough, these cards give you back a variable percentage (1-2% depending on card) of your transactions in this cryptocurrency.
Unfortunately, there’s a waiting list. When I opened my account, I had 27384 people ahead of me, waiting to receive their cards. This number hasn’t moved since I registered. Thus, I don’t hold my breath for receiving mine anytime soon.
First, the easy discards. I can’t really comment on Mona.co, maybe one day I will receive my card and update this post. My suggestion is to stay away from N26. They are not ready for digital nomads or a borderless world. If global, digital banking is the goal, they are not the solution.
Monzo is very nice, they have a beautiful App, and the FSCS insurance is definitely a plus. However, focused in the British banking ecosystem, they are somewhat limited in scope. The mandatory £100 initial deposit is also a drawback.
Thus, the real winner for me is Revolut. The registration process is a pleasure, and the App is simply amazing. Apart from that, the fact that you can have different accounts for different currencies, and transmit money without fees between them is simply a game changer.
I have used my Revolut card for everything, from buying Bitcoins to paying at restaurants. The only time that I was not able to use it was on a Norwegian Airlines flight to buy a coffee. As I had withdrawn some money from an ATM before, it was not big deal for me.
In this article, I talked about the digital banking revolution and how traditional banking is becoming obsolete in a progressively decentralized world. For digital nomads, digital banking solutions are the way to go. I also compared four available digital banking solutions based on my experiences.
Any questions? Are you part of the digital banking revolution and want to share your experiences with us? Don’t hesitate to do so in the comments!
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Years ago, I quit my 9 to 5 job and became a freelancer first, then a solopreneur, and finally a digital nomad. Managing my company back in Spain was a nightmare until I discovered the e-Residency program and opened my company in Estonia. That changed my life.
After some years managing my business, I know the tricks of the trade. I can offer you advice on how to become location independent, found an European company you can manage online while traveling, and avoid unnecessary costs. If you are ready to take the leap, but have some doubts or don't know where to start, let's get in touch.