MOST banks and building societies now offer the option of mobile banking, and a new generation of banks operates exclusively via your mobile. So how does mobile banking work and can it help you to manage your finances?

In order to access mobile banking, you have to download an app, which is a software application designed for your mobile. You simply click on the icon for the app store on the home screen of your mobile and search for the app you want.

All the major banks and building societies offer free apps that allow you to manage your existing accounts, and they all perform similar functions. For example, you can make payments, check your balance, look at statements, manage standing orders and freeze a card if it is lost or stolen. You can also set up reminders to pay bills and alerts if your account balance is running low.

Some banks offer additional facilities. For example, Bank of Scotland’s Save the Change function rounds up the amount you spend using your debit card to the nearest pound, with the extra moved to a linked Bank of Scotland account. So, if you spend £1.60, the bank will automatically transfer 40p to your savings account.

Clydesdale Bank and Yorkshire Bank each have their own apps, but together they also run an app-only service called B, which links a current account, savings account and credit card. The B current account has no monthly fee and pays 0.5 per cent credit interest. It compares favourably to the traditional current account offerings from Clydesdale and Yorkshire, which charge monthly fees of £7.50 or £13.50 and pay no credit interest.

A spokesperson for B said: “The B app is packed full of clever money management tools that help to put customers in control of their money. As well as giving a clearer picture of how they spend their money via the tagging feature, there are also saving pots, which encourage customers to get into good savings habits. Security is the number one priority for the bank and we are constantly reviewing and enhancing our app technology to ensure our customers are protected.”

A new generation of banks, such as Monzo, Revolut and Starling, operate entirely through mobile apps, meaning there is no way to directly deposit money. That said, they have made arrangements to allow customers to pay in cash or cheques, with Starling customers able to pay in cash at Post Office or NatWest branches, or by sending a cheque by post.

Monzo, Revolut and Starling are all regulated in the UK and bound by the Financial Services Compensation Scheme (FSCS).

There is also a growing number of apps that are designed to help customers manage their finances. They are usually free to download but may sell on your data to advertisers to generate revenue. Others charge a subscription. For example, the Moneyhub app, which offers budgeting tools and access to financial advisers, costs £1.49 and month or £14.99 a year.

Rachel Springall of Moneyfacts, a financial data firm, is a fan of Chip. She said: “It works out how much money users could save and sends a text message as a notification before transferring an amount to a separate savings pot. It’s ideal for people who don’t want to put away a set amount each month using a standing order.”

The Moneybox app offers a quick and easy way to invest in funds that track stock-market indices. The app also offers a round-up function, which lets you round up your debit and credit card payments to the nearest pound, with the extra added to your investments.

Moneybox charges a fixed fee of £1 a month, though it is free for the first three months. You then pay a platform fee of 0.45% of the value of your investments each year, plus the annual fund management charges, which range from 0.12% to 0.3%. Investments in the Moneybox app are protected by the FSCS up to £50,000.

Many apps recommend other products such as credit cards and they will earn a commission if customer apply for those through the app. Anyone tempted to follow those recommendations should remember that they might not be choosing the most suitable, or the most competitive, product.

Also, while advocates of mobile banking play down any security fears, anyone using an apps should make sure their phone is always kept in a safe place and use a password to lock it when not in use.