FinTech Sector Seeks Faster-Paced Innovation

Statism and entrepreneurism make uneasy bed fellows. Part of the problem is the difficulty of government remaining hands off while also providing stimulus. Our friends at Finextra report on the FinTech sector’s impatience at the state’s benign attempts to create the a benign environment for growth.

In an open letter to the UK Government, almost 70 fintech founders and CEOs have called for further progress in implementing the reforms advocated by the Kalifa Review into financial services.

The letter, co-signed by Innovate Finance members from the likes of Monzo, Starling and OakNorth, notes positive momentum in implementation in the year since the Kalifa review was published, pointing to the new industry-led Centre for Finance, Innovation and Technology (CFIT), regulatory initiatives like the FCA’s sandbox and the Bank of England’s work on digital currencies, the overhaul of the UK listings regime and the forthcoming introduction of scale-up visas.

Despite the positives, Innovate Finance in November bemoaned the Government’s failure to devise a cohesive national strategy for UK fintech, as recommended by the Kalifa Review. The signatories to today’s letter are demanding further progress if the UK is to retain its position in Europe as the as the best place to start, grow and build a fintech business.

“Rather than resting on our laurels, it is imperative that we continue to build on this momentum and work together to establish an environment in the UK that is even more supportive of and conducive to innovation in financial services,” states the letter.

In pactice, this will entail an update of the regulatory rulebook to fully embrace innovation in an international context and to pave the way for new rules that will drive the UK’s position as a leader in crypto, open banking and RegTech.

The industry is also calling on the Government to address the growth capital gap by shifting the mindset of institutional investors in the UK to take a longer-term view and focus on growth opportunities in Britain while encouraging larger UK institutions to invest more in advanced technology.

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.


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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.