Lenders Take A High-Tech Look At P2P Loan Security

Today, we offer a snapshot of one of the things that happens online when big FinTech companies try to manage their growth. Major peer-to-peer (P2P) lenders in the US and Australia are turning to an independent supplier of blockchain technology to minimise fraud.

Our friends at AltFi report it this way:

More than a dozen online lenders including Funding Circle, SoFi, OnDeck and Avant have partnered with blockchain startup Spring Labs to use distributed ledger and crypto technology in a bid to prevent fraud, enhance ID verification and lower origination costs.

Spring Labs, which recently added Gary Cohn, former president of Goldman Sachs and economic advisor to President Trump, as an advisor, closed one of the largest early rounds for a blockchain start-up last year at just shy of $15m.

Its new service will aim to help platforms with the fight against fraudulent activities and the expense of exchanging consumer credit data with credit bureaus.”

Money&Co., which has facilitated nearly £15 million in loans since trading began in Spring of 2104, has occasionally faced criticism for what some perceive as a relatively slow rate of growth. The response to that is that our focus is on the quality of the loans and the borrowers behind them.

We believe that the biggest problem facing our exciting and innovative P2P industry is the quality of the loan book. Good credit analysis must be applied very early in the lending process. Going for growth cannot and must not interfere with this.  We can’t be certain of this at the time of writing, but we believe that we have the least problematic loan book of any P2P lender in the UK. Our emphasis is nd always has been on finding mature small businesses (the average age of our borrowing businesses is over 13 years) with an established track record of profitability. Lenders have achieved returns of over 8 per cent gross (our charge is one per cent). All loans are eligible to be held, tax-free, in an Innovative Finance Individual Savings Account (IFISA).

A Process Guide To Innovative Finance ISA Investment

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 2018/19 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.


Search news

You may put double quotes around your search to search for literals. Max. 4 words inside quotes (dashed words count as one word).

Allowed symbols: " ' & -

More from news

Disclaimer: Money&Co.™ is the trading name of Denmark Square Limited, Company Number 08561817, registered in England & Wales, authorised and regulated by the Financial Conduct Authority (FCA). The company is identified on the Financial Services Register under Reference Number 727325. The registered office is 58 Glentham Road, Barnes, London, SW13 9JJ where the register of Directors may be inspected. Denmark Square Limited (ISA manager reference number Z1932) manages the Money&Co. Innovative Finance ISA.