Payset prespective
May 18, 2023

What Is a Bank Alternative and How Does it Work?

Bank alternatives offer a different approach to payments that can be helpful to those who struggle with traditional banking processes. Read our guide to learn more.

Bank alternatives have recently appeared that give you new ways to save, spend, and manage money, often more affordably and conveniently.

These bank alternatives can provide potential benefits for certain users. Here’s what you should know about the various alternatives to banks.

What is a bank alternative?

A bank alternative provides flexible and non-traditional financial services.

Compared to traditional banks, a banking alternative is often less strict in terms of what they require from customers. A bank alternative typically provides remote services and often do not have any public branches or provide in-person services. They may serve customers from around the world, or they may only serve a small, focused community.

In short, any service not provided by a traditional bank can be considered a bank alternative.

Who is a bank alternative suitable for?

Almost anyone can open an account at a bank alternative, but it is especially useful for individuals who find themselves in certain circumstances.

A bank alternative is an especially good option for individuals who cannot open a traditional bank account. Unlike some traditional banks, a bank alternative rarely refuses to serve individuals with no credit history or a poor credit score.

Additionally, some a bank alternatives support a wide range of countries and currencies. These services usually do not require proof-of-residency from their customers and may accept clients from around the world. As such, a bank alternative is often ideal for individuals who travel, work abroad, or send and receive money internationally. 

Examples of bank alternatives:

Fintech banking

Fintech banks are companies that are focused on financial technology, meaning that they provide a wide variety of digital financial services. 

In fact, most fintech banks only provide digital services and rarely have in-person branches or services. Instead, users must access services online or through a mobile app.

Fintech banks may provide faster service and better rates than traditional banks, though this depends on whether the service takes full advantage of the benefits of digital finance.

Debit cards

Debit cards are payment cards that are linked to a funding balance. These cards can be spent at most locations that accept traditional debit cards.

Some prepaid debit cards may allow you to spend funds that are automatically drawn from your account. Other prepaid cards may require you to “top up” your balance or allocate funds from a linked account, paycheque, or other source before you use your card to spend money.

Prepaid debit cards are often a better choice than traditional debit cards because they do not require you to open a standard bank account. These cards are also more manageable than credit cards, as you do not need to pay monthly bills or interest on a prepaid card.

Peer-to-peer banking

Peer-to-peer (P2P) banking apps allow you to perform transactions and make other financial arrangements with people that you know.

Often, individuals who use P2P banking apps simply use this type of service to send and receive money from friends and family. However, some P2P banking apps also allow their users to split bills, raise funds in a shared account, or arrange peer loans.

P2P banking services impose fewer requirements and offer better fees than traditional banks. This is due to the fact that P2P services are powered by a community of users: app providers do not need to rely entirely on traditional banking and pay the related costs. 

Credit Unions

Credit unions are similar to regular banks as they provide access to savings, loans, and more.

However, unlike traditional banks, credit unions are usually non-profit organizations and are often community-operated. Because credit unions are not driven by profit, they may provide better rates, fees, and terms of service than regular banks. 

Credit unions often have physical branch locations and provide limited online banking features. As such, credit unions are a good choice if you need semi-traditional banking services. 

Community banking

Community banks are minor banking services that serve small areas. These banks usually have fewer assets and funds than traditional banks, and they may provide fewer services. Community banks are a good choice if you live in a small city or town and have few other options.

Payment services

The term “payment services” applies to a wide variety of financial services, including some of the services described above. As the name suggests, these services are usually focused on payments and transactions rather than other banking services such as loans and credit. Payset is one of the leading payment services companies in the UK.

Pros and cons of a bank alternative:

Pros of a bank alternative

Bank alternatives have several advantages, including:

  • Fewer customer requirements: Many bank alternatives  are open to customers even if you have a low credit score or reside in a foreign country
  • Better fees and terms: Because bank alternatives aim to compete with mainstream payment services, they often offer lower fees and better terms of service
  • Greater convenience: Bank alternatives don’t require you to visit a bank branch in person; you can instead set up an account remotely
  • Better user experience: Bank alternatives usually provide apps that are more streamlined than traditional online banking services

Cons of a bank alternative

Bank alternatives also have a number of disadvantages, such as:

  • Online-only services: Some bank alternatives provide only online services, though this is not always an case — many services provide mobile payment apps or cards that allow you to spend your balance almost anywhere you go
  • Remote support only: Many bank alternatives have no physical branches, meaning that you must rely on chat, email, or phone support if you need assistance
  • Less brand recognition: Most bank alternatives are not well-known, meaning that deciding on a reputable service may take some effort
  • Lack of ATMs: Often, bank alternatives do not have dedicated ATMs; as such, withdrawing cash from ATMs can be difficult or can come with high fees

How can I choose the right bank alternative option for me?

There are plenty of options when it comes to choosing a bank alternative. However, you should fully research each option before you choose a service.

Rating and review sites, such as Trustpilot and TheBanks.eu, can help you compare Payset and other bank alternatives.

You can also try out multiple bank alternatives by storing a portion of your funds with each one. In this way, you can choose the service that is best for you.

Bank Alternatives FAQs:

Where can I keep my money instead of a bank?

Most bank alternatives allow you to store money in an account that they provide, meaning that you do not need to keep your money in a standard bank account. 

Usually, transferring funds from an external platform means that you will need to pay fees, so it is a good idea to keep as much money as you need in any account at all times.

Are bank alternatives safe?

Financial services must follow local laws and regulations, (Pay Set Limited is an authorized electronic money institution incorporated under the laws of England and Wales), and most areas require financial services to provide insurance. This covers user funds if the company fails.

It is important to note that most financial services do not cover personal losses. You are responsible for keeping your funds and login information secure, and your funds can be stolen from any type of account if you do not protect your private information. 

How is an alternative bank different from a traditional bank

Unlike traditional banking, bank alternatives have an extensive focus on online and mobile access and have a reduced focus on in-person and branch services. 

Though traditional banks provide online banking and remote support, bank alternatives are usually a better option if you plan to make remote or digital payments of any sort.

Payset, A Bank Alternative

Payset offers an alternative to a bank with services including a multi-currency IBAN account and an online currency exchange. Our services are available in 180 countries.

With a Payset account, you can send 38 foreign currencies via leading payment networks such as SWIFT, SEPA, CHAPS, FPS, and more. Our sending fees begin at 0.45%, and it’s always free to receive money. It is also free to send money to other Payset customers.

To sign up, click below:

open account

Frequently asked questions

What is a multi-currency account/virtual IBAN?

A Payset multi-currency account allows you to receive money in 34 different currencies and send money in up to 38 currencies, all within the same account.

You can deposit and withdraw funds, convert currencies at competitive exchange rates, and hold your chosen currencies to capitalize on market movements.

A Payset multi-currency account allows startups and business owners to receive payments from clients virtually anywhere in the world and pay suppliers, staff, and contractors quickly and affordably in their chosen currency.

  • Funds can be deposited and withdrawn from the account for a small fee.
  • Account holders can send and receive money with other Payset users for free.
  • Depending on your region, you can use various payment networks from your Payset account, including SWIFT, SEPA, ACH, Fedwire, Faster Payments, BACS, and CHAPS. 
  • Once you register an account, you will be provided with a Virtual IBAN (International Bank Account Number), which makes all of these transfers easy.
  • We provide you with local payments and collections. For example, transactions in USD, EUR, CAD, and GBP are processed through the local payment networks, which is far cheaper and takes minutes as opposed to days

Are there limits on the amount of money I can send and receive?

No, there are no transaction limits on Payset multi-currency accounts.

However, higher-volume transactions may require additional anti-fraud verification. If you plan to make a large transaction, contact us in advance to avoid verification delays.

How is Payset regulated?

Payset allows you to receive payments in 34 currencies. You can send payments from your account in 38 currencies. For more details, check our payment guide.

How do I send money from my account?

Once you have opened your verified IBAN account and added money to a balance, transferring funds is simple.

Simply log in into your account and add a beneficiary, then simply “make a transfer” in your preferred currency to that beneficiary.

Information contained in this publication is provided for general education and information purposes only and should not be construed as legal, tax, investment or other professional advice or recommendation, or an offer of, or solicitation for, any transactions or any other actions (or refraining therefrom); This material has been prepared without taking into account any particular recipient’s financial objectives or situation. We make no warranty, guarantee or representation, whether express or implied, as to the completeness or accuracy of the information contained herein or fitness thereof for a particular purpose; Use of images and symbols is made for illustrative purposes only and does not constitute a recommendation or advice to take or refraining from any action; Use of brand logos does not necessarily imply a contractual relationship between us and the entities owning the logos, nor does it represent an endorsement of any such entity by Pay Set Limited, or vice versa; Market information is made available to you only as a service, and we do not endorse or approve it; Any reference to past performance, predicted returns, or likelihood performance scenarios may not reflect actual future performance and certainly do not guarantee future outcomes.

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