Signs Of Life Beyond Re-Branding In FinTech Sector
Two snap shots of today’s FinTech sector. The first is superficial, but f they’ve nothing better to do…?
Industry body the Digital Finance Forum (DFF) has given itself a fresh lick of paint, rebranding as Fintech Founders.
DFF was launched back in 2016, with the aim of creating stronger communication channels between entrepreneurs, startups, government and regulators.
The rebrand comes as a DFF survey, conducted earlier this year, revealed that founders across the fintech sector feel both them and their businesses have been overlooked by the government.
DFF and its Steering Group have made the step to be more assertive within the fintech ecosystem, now operating under the new Fintech Founders moniker.
Outfund, a lender which uses Open Banking to lend against the revenues of small online businesses, has secured £37m in seed funding.
The injection of capital comes from new backers Fuel Ventures, TMT investments, Force Over Mass and angel investor Chris Adelsbach.
At the moment Outfund offers SMEs which trade online up to £2m in funding, which they access by connecting their primary revenue bank account to Outfund by open banking.
Repayments are based on a revenue share with Outfund, which is a flexible percentage based on trading activity.
“Our ambition is for Outfund to be the place to go to grow your business without compromising your equity or wasting time fundraising. This is why we have spent time developing a way to make the process of securing money for growth easier, fairer and most importantly, faster,” said founder and CEO Daniel Lipinski.
“Our approach has been warmly received by founders and directors alike and so now we’re looking at how we can open this up to more businesses and continue to be part of their journey to success for a long time.”
Outfund only lends to borrowers with at least six months of trading history and a minimum of £10,000 in monthly turnover.
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 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.
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.