Build it, and they will come. Further proof were it needed, that the FinTech sector is a giant experiment in, amongst other things supply-side development, comes with the latest announcement from the top financial watch dog, the Financial Conduct Authority (FCA).
The Financial Conduct Authority and the City of London Corporation have called in Fintech Sandpit to help build a digital sandbox.
The sandbox, in pilot, is already being used by members of the country’s financial services industry to work on issues that have been exacerbated by Covid-19, including fraud prevention, improving the financial resilience of vulnerable consumers, and increasing access to finance for SMEs.
Sandbox users get to test their offerings with huge data sets, including 400 million transactional banking records, SME lending data based on 600,000 SMEs and a 10% sample of the UK population.
The box also includes an open API marketplace, where digital service providers list and provide access to services via APIs in a standardised and secure manner. Meanwhile, users can tap collaboration features to connect with each other, while an observation deck lets regulators and other interested parties observe in-flight testing at a technical level.
Historical Performance And IFISA Process Guide
That figure is the result of over £20 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.
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:
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.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.