Covid Necessities Mother AltFi Invention
The pandemic has certainly been an agent for change. The need to adapt strategy and business direction has become a matter of survival for both mainstream and alternative financial sectors. The inventiveness, mothered by necessity, may even see one of the oldest and best-established direct lending platforms morph into an altogether different type of financial institution.
Few expected the coronavirus to have such a cataclysmic effect on normal life but that’s not to say some companies did not plan for something approximating its disruption.
Zopa’s CEO Jaidev Janardana says the speed of the crisis was a surprise for many, including the world’s first fintech lender. Moving everybody out of their London and Barcelona offices happened over the course of just three days in mid-March when things started to get serious.
As the first peer-to-peer lender, having launched in 2005, it has seen out one major global financial crisis already. It is principally a consumer lender but was poised to launch the biggest strategic shift in its history: a ‘next-generation digital bank’ after 4 years of preparation. COVID-19 could have been enough to knock its pivot off course.
The launch earlier this month, which could prompt Zopa to move on entirely from its peer-to-peer lending origins, which operate as a profitable business, was arguably not ideally suited to a pandemic. But the firm already had a plan.
Historical Performance And IFISA Process Guide
- Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee).
That figure is the result of over £21 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.
- Money&Co. has been lending for over 5 years and has only had two bad debts so far, representing a bad debt rate of 0.03 per cent per annum.
All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here’s our guide to the process:
- Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
- Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
- Step 3: Buy loans in the loan market. Once you’ve put cash in your account it will sit there – and it won’t earn interest until you’ve bought a piece of a loan. It’s this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans – all loans on the Money&Co. site can be held in an IFISA – and your money will start earning tax-free interest.
The ISA allowance for 2019/20 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.