Few people think banks are fun, exactly. But banking is often seen as an unavoidable part of modern life—preferable, at the very least, to burying money in your backyard.
Still, as a dual-citizen freelancer who often travels in Europe and has bank accounts in both the UK and the US, I’ve found that banks keep letting me down when it comes to functionality, security, and convenience. Between the difficulty and cost of moving money between international accounts, the headaches caused by payments from foreign clients in foreign currencies, and the painful accrual of ATM withdrawal fees on long stints abroad, I’ve made a decision: In 2017, I’m going to use banks less.
It’s not just digital nomads who are eager to move away from mainstream banking. A 2015 report by Goldman Sachs found that 33% of millennials thought they wouldn’t need a bank in just five years, and 71% feel no relationship with their bank. The report [PDF] went on to say that while millennials may be driving the charge, “every demographic is incrementally demanding transparency, convenience, and lower costs/higher returns in ways that are creating new companies and forcing traditional financial services companies to adapt.”
Right now, it’s not realistic for me (or many others) to give up banks entirely. But there are ways to get around the biggest inconveniences posed by mainstream institutions. Here’s how I resolve to do that next year.
The first order of business for my New Year’s banking detox is to order a Monzo card. The UK-based company, now in beta, currently offers its users a pre-paid-style Visa debit card which can be “topped up” with an existing bank account. The card is good for frequent travelers because it can be used across the world and does not charge fees for either withdrawals or card transactions. (Monzo eats the overseas conversion fee for its users. However, they say this amounts to mere pennies, far from the $2.50-$5.00 per-transaction charges that many banks incur on their users internationally.) In-app notifications and alerts help you keep track of what you’re spending where, so you don’t have to use an additional budgeting app like Mint.
Monzo is rolling out their fully-accredited checking account in the UK in spring of 2017, which will mean that anyone in the UK can set up a bank account via their phone and verify their identity with a selfie, all without stepping foot in a branch (… because there is no branch). At that point, Monzo users can ditch their major bank if they want to.
“We have to become a bank to adhere with regulators,” says Bailey Kursar, part of Monzo’s marketing team. “But in terms of the person who uses Monzo, they won’t think of us as a bank—they’ll think of us as the app that controls their finances.”
Monzo has aspirations to expand to the US in the next two years, pending regulatory hurdles. In the meantime, a similar app-centric service—Simple Bank—already exists in the states. Unlike Monzo, however, Simple is a software company that offers FDIC-insured checking accounts in partnership with two banks (the Bancorp Bank or Compass Bank). In 2014, Simple was acquired by banking group BBVA for $117 million, which left some users publicly wondering why a brand that prided itself on not being a bank cozied up to one so easily. It also doesn’t offer completely fee-free foreign transactions between countries, which is a major downside for nomads and frequent travelers.
Monzo’s CEO Tom Blomfield insists that once the checking account is launched, he will happily be ditching his major UK bank. But only time will tell if Monzo users will truly want to give up traditional banks, which offer a wider suite of financial services.
Up until recently, Bitcoin remained off my personal finance radar. The blockchain sounded complicated, and I associated the cryptocurrency mainly with online black markets.
But because of the appeal of being paid in a currency that’s designed to instantaneously and untraceably cross borders, I decided to download a bitcoin wallet—apps that you can use to buy, spend, and transfer bitcoins.
Nicolas Cary, co-founder of the bitcoin wallet Blockchain, notes that bitcoins are both “a currency and a store of value.” As a currency, “programmers in Ukraine [might] rely on it to get paid for their work because PayPal doesn’t operate there,” Cary says. Alternatively, in the aftermath of Brexit, UK residents might choose to store their money in bitcoins rather than volatile pounds. Though bitcoin valuation has historically been volatile thanks to its rather niche status and unpopularity with regulators, Bloomberg noted this week that the currency has “emerged as a better bet this year than every major foreign-exchange trade, stock index and commodity contract.”
Though setting up my wallet is seamless, the downside of using bitcoin is that you’re limited in who accepts it. Pulling up the app on my phone, I’m given a “Merchant Map” based on my location that includes only a handful of restaurants, bars, and one “exchange” (where I can purchase bitcoins with traditional currency or have them sent to my phone). And in order to get paid for freelance work in bitcoin, my employer would have to be a user themselves. But in the increasing age of surveillance and global uncertainty, it’s easy to see the appeal of a sovereign currency.
Moving money across borders is perhaps the area in which banks are most unfriendly to consumers. When money crosses borders, it must pass through multiple intermediaries and regulatory structures—all of which results in volatile exchange rates, long waiting times, and hidden fees levied by banks eager to cash in on a captive market. This makes receiving and sending payments from abroad as a freelancer completely untenable.
So it’s easy to see the appeal in UK-based TransferWise’s peer-to-peer system, which offers transfers that are up to eight times cheaper when compared with banks. The company sidesteps the headache with a system that means money never leaves borders. TransferWise holds domestic bank accounts in each of the 38 countries they operate in. So, if I have dollars in the US that I’d rather have as pounds in my UK account, I simply make a payment to TransferWise’s US account using my American debit card. They then reroute that amount to another customer who wants money sent to the US, and deposit the equivalent amount of money from their UK account into mine. I can use the same system to get paid by a European client, or pay rent to a temporary landlord in a country where I don’t have a bank account.
TransferWise uses a real exchange rate, guaranteed at the time of transfer. (Banks typically charge a 3-5% markup on the exchange rate you find on Google.) And the fees are negligible: to transfer £200 into USD, TransferWise levies a £2 fee, which serves as the source of their income). So it’s already become a key mechanism for me to get paid and make payments abroad, usually within 48 hours.
Such services are sidestepping, rather than eliminating, the need for banks. But the overall trend is clear. Fintech is the future of banking—and for digital nomads, that future is fast approaching.