Digital Banks Lead Change - But Deposit Accountholders Lag The Field
Banking as we know it is set to change. Maybe, just maybe, mainstream banks will begin to offer better returns on their deposit accounts one day (tricky, though that is, given their overheads). If they ever get there, the alternative finance sector, with FinTech in the form of digital banks, will lead the charge. Our friends at AltFi report.
UK digital banks added six million new customers in the second half of 2019, meaning there are now nearly 20m UK digital bank customers, but the average deposit balance dropped by 25 per cent in the period.Research from consultancy Accenture reveals that digital banks had a total of 19.6m customers at the end of 2019, up from 13m in the first half of last year, according to Accenture's Digital Banking Tracker.Digital banks have nearly trebled their customer base in the past year, up from 7.7m customers in 2018 to near 20m in 2019, the research found.According to Accenture, the 150 per cent growth seen by UK digital banks outstrips growth of two per cent seen by traditional banks.But the research also found that the 150 per cent growth in the second half was down from 170 per cent in the first half while the average deposit balance dropped by 25 per cent from £350 to £260 per customer.Accenture's Digital Baking Tracker is published every six months and tracks data of 30 UK banks.
Loan Offer Latest
Yes You Can, rated B, for £30,000 with an 11 per cent fixed yield over five years, is now filled. Project Rhapsody rated A+, with an 8 per cent fixed yield for three years is also filled. More loan offerings will land on site soon.
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 £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.
Money&Co. has been lending for over 5 years and has only had one bad debt 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.