Open Banking – Yes. Open Goal? No! Plus Loan Auction Latest
Open banking is the great hope for the future of a modern financial-services sector. But open banking does not mean “open goal” – it’s an opportunity that has to be taken the right way.
Two of the UK’s largest banks Lloyds and Barclays have been notified of failures in complying with open banking rules by the UK’s leading authority in the area, the Competition and Markets Authority.
The CMA, the UK’s competition watchdog, in two separate letters – both written by Dipesh Shah, Director of Remedies, Business and Financial Analysis at the organisation – outlined yesterday a number of instances where the two banks breached the 2017 Retail Banking Market Investigation Order in relation to open APIs.
Lloyds and Barclays alongside seven other banks must abide by rules that open up their customer data via APIs as part of the UK’s open banking regime.
Barclays breached the Order thirteen times, the CMA said in its letter, by failing to make “continuously available accurate, comprehensive and up to date information on its products and services”.
In practice, this meant APIs that Barclays created to fulfil their obligation did not have the correct information listed or were not fully up to date. This means third parties calling on that API would not be able to accurately relay the information.
Loan Auction Latest
- The end of the tax year is approaching, and we currently have four loan auctions on site.
All these loans can be held, up to £20,000, as Innovative Finance Individual Savings Accounts (IFISAs). IFISAs are explained in more detail below. Here’s the latest from the auction room:
- Mar-Key has a credit rating of A+, a yield of 7 per cent and a term of two years. It is currently 17 per cent filled.
- HTHL Ltd has a credit rating of A+, a yield of 7 per cent and a term of one years. It is currently 14 per cent filled.
- Fleetwood Legal has a credit rating of A, a yield of 7 per cent and a term of one year. It is currently 30 per cent filled.
- Bonnington Law has a credit rating of A, a yield of 7 per cent and a term of one year. It is currently 20 per cent filled.
- You can see detail on each by logging in and downloading the credit note.
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 £24 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 2020/21 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.