How are internet banks different from the high street?

Internet banks include a range of different financial services providers – and there are other online account providers, like Arro Money, that are not technically banks at all, but we’ll explain that difference below.

Just because you have access to online banking or your bank has a website, it doesn’t mean it’s really an ‘internet bank’ in the strictest sense.

To be a true internet bank, you should be able to do most or even all of your essential account admin via the internet, without the need to go into a branch.

Of course there are places where the boundary between online and ‘the real world’ blurs, so for example, just because you have an online account, it doesn’t mean you can’t get cash from an ATM or use a physical debit card.

Internet banks are online-first

It’s helpful to think of internet banks as ‘online-first’ rather than ‘online-only’. So while the website or online dashboard is your first port of call for admin, you may also have access to telephone or email customer support, and in some cases you can even get service in affiliated physical branches.

This is the case with First Direct, one of the oldest internet banks in the UK. It launched in 1989 as a telephone banking service, launched SMS banking in 1999 and had an early online banking service up and running in 2000.

What many people don’t realise is that First Direct was set up by the then Midland Bank – later acquired by HSBC – and while this means you can get some service in HSBC branches if you need it, it may also mean that the Financial Services Compensation Scheme will only pay its maximum amount – £85,000 at the time of writing – across all of your HSBC and First Direct balances combined.

So just because a bank is online-first, it does not mean it is completely independent from the big high street banks, and that can actually mean your money is less protected overall.

Independent online banks

If you are looking for a truly independent online bank account, it’s worth understanding more about online account providers that are not banks – such as Arro Money.

An online account like the Arro Personal Account can look a lot like a bank account, with its own sort code and account number, a dashboard to schedule Faster Payments and Direct Debits (not currently available, but it’s coming soon!), and a MasterCard® debit card, but we are not regulated as a bank.

Instead we are an electronic money services provider, and we are proud to be technology-driven, with a purpose-built account dashboard that serves as your primary point of call when you need to access your account and manage your money.

We process applications entirely online too – even using online ID checks so you don’t have to send us any paperwork – and we guarantee to accept you if we can, subject to our Fair Fit rules, and with no credit check.

An instant account for online shopping

Often when you’re looking for an internet bank account, it’s because you want an instant account for online shopping, and it makes sense for your account to be based online too.

With our automated, entirely online application process, your Arro Personal Account can be up and running in three minutes, and you can immediately transfer funds in using the sort code and account number.

We also immediately send you your virtual MasterCard® debit card details via SMS, and this means you can buy things online with your virtual debit card right away, using the funds you transfer into your Arro Personal Account, and even before the physical card is mailed out to you.

Online approval with no ID or credit score

With no overdraft or credit card, there’s no need for us to check your credit score, so don’t worry – we won’t reject you based on your credit record.

You also usually don’t need to send us any ID or documents and paperwork, as we use online databases to verify your identity down to street level – again without running any background credit check.

It’s also worth noting that we protect our clients’ funds by holding them in a separate account that our creditors cannot lay claim to – so whatever happens, you will never need to make a claim to the Financial Services Compensation Scheme.

Unlike some of the internet banks that are owned by the same groups as the high street brands, Arro Money is proudly independent, technology-driven, online-only and committed to protecting our customer deposits.