As N26 makes its UK debut, we look at what you can expect from the new breed of services The march of the smartphone-based “challenger banks” continues, with the German-based N26 the latest to launch in the UK.It joins other app-based banks, such as Monzo and Starling, that are shaking up the banking industry.Launched in 2015 and headquartered in Berlin, N26 has grown rapidly – it has 1.5 million customers across 22 countries – and clearly doesn’t plan to let Brexit stand in the way of its UK ambitions.N26 went live in the UK on 21 November, and is offering a free-to-use current account to over-18s. But with Brexit just around the corner, is signing up with a German-based bank a good idea? And how does N26 stack up against its rivals? One thing that applies to all of the app-based banks is that you need to know your way around a smartphone. For example, in order to open an account, you will typically have to take a selfie photo or video, and also submit a photo of your passport or driving licence.N26The basics It offers a full bank account with a Mastercard debit card. It operates in Britain via its European banking licence, “passporting” the German licence to the UK for the time being. Your money is guaranteed by the German bank deposit protection scheme up to €100,000 (£89,000), rather than the UK’s Financial Services Compensation Scheme (FSCS), which protects up to £85,000. Business Today: sign up for a morning shot of financial news Read more Pros The app boasts instant notifications on transactions, sub-accounts to organise money, and the ability to instantly lock your card if you lose it. It offers unlimited free ATM withdrawals in the UK; payments abroad are at the Mastercard exchange rate, with no mark-up fees.AdvertisementCons Some people will be uneasy about the fact that N26 isn’t covered by the UK protection scheme, and might wonder what will happen post-Brexit. It could be that European banks currently passporting into the UK simply continue operating here while they apply for full UK authorisation, but there’s still a lot of uncertainty in this area. At the moment, you can’t set up direct debits or standing orders, which may be a deal-breaker for some – but the bank says: “These are expected in a matter of weeks.” Also, you can’t make cash deposits or pay in cheques. Note that there is a 1.7% charge on ATM withdrawals abroad. Overdrafts aren’t available at the moment, though N26 says it expects to launch them before the end of the year.MonzoThe basics Monzo was founded in 2015 and started out offering a prepaid debit card before switching customers to a full current account. It now boasts almost 1.2 million customers (you must be 16 or older). The account comes with a Mastercard debit card.Pros You can split bills, set budgets and get instant notifications, plus set up direct debits and standing orders and pay people instantly and so on. Cash withdrawals in the UK are free and, like N26, when you are spending abroad, it passes Mastercard’s exchange rate on to the customer, without adding fees. You can pay in cheques by post, and this week Monzo announced that users can now deposit cash into their accounts at any of the 28,000 PayPoint stores across the UK (fee: £1). Overdrafts are available. Monzo scored well in a MoneySavingExpert customer service survey. Your money is protected by the FSCS up to £85,000.Cons If you are withdrawing cash from overseas ATMs, you can get up to £200 every 30 days for free, after which you will be charged a 3% fee.Starling BankThe basics Starling went fully live in May 2017 and now has about 325,000 personal accounts. It offers a full current account that comes with a Mastercard debit card. In August it launched current accounts for 16- to 17-year-olds.Pros You can pay people instantly and set up direct debits and standing orders. Other features include real-time notifications and the ability to split bills, and lock and unlock your card. Starling pays interest on its current accounts: 0.5% on balances up to £2,000, then 0.25% up to £85,000. There are no ATM fees in the UK or abroad, and when you spend overseas, it passes on Mastercard’s exchange rate, without any fees. It has just linked with the Post Office to allow customers to deposit and withdraw cash through its 11,500 branches. You can pay in cheques by post, and overdrafts are available. Your money is protected by the FSCS up to £85,000.Cons In September it suddenly closed down its community forum, prompting criticism. Starling denied it was to avoid negative feedback, but it didn’t look good.RevolutThe basics London-based Revolut launched in 2015 and has 3 million customers across Europe, of whom 1.5 million are in the UK. It’s not a bank (yet) – it’s an “electronic money institution” – though it offers a product to over-18s that is essentially a current account with a debit card. Revolut has applied for a European banking licence, which it hopes to get in the next few months.Pros All the usual features are offered – budgeting tools, instant spending notifications, the ability to lock and unlock your card, and so on. You can use the card to spend abroad in more than 150 currencies, typically with no fees. Revolut uses the interbank exchange rate, which it says is better than the Mastercard rate used by Monzo. You can transfer money abroad in 24 currencies at that rate, too.Cons Crucially, because Revolut is an electronic money institution, your money isn’t covered by the FSCS, though that could change in the coming Revolut is authorised by the Financial Conduct Authority and says client funds are held in segregated accounts at Lloyds and Barclays. months. Direct debits can’t be set up – this is “coming” – and there’s no overdraft available yet. ATM withdrawals in the UK and overseas are free up to £200 a month, after which a 2% fee kicks in. In certain situations, fees apply on overseas spending and transfers. Since you’re here… … we have a small favour to ask. Three years ago we set out to make The Guardian sustainable by deepening our relationship with our readers. 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1 The Smartphone Apps That Will Change The Way You Bank Photos