Alternative Finance To Tighten Security – Plus Loan Auction Latest
We were recently contacted by top trade media outlet, P2P Finance News, regarding security checks and anti-money-laundering provisions. The enquiry came as a result of concerns expressed by UK regulators about alternative-finance lending and banking.
Fortunately (we are vigilant, and have top-quality systems in place) we have been free from trouble at Money&Co. We reproduce the relevant article, where we feature at the tail end…
Peer-to-peer lending platforms should work to improve their security systems, as consumers become more worried about their online safety when spending and investing money.
According to Experian’s latest Global Insights Report, increased online activity has led to heightened concerns about online security, with 42 per cent of consumers more concerned than they were 12 months ago.
This concern is highest among high income groups, which are also the most engaged online.
However, the majority (84 per cent) of consumers said they are confident that the businesses they transact with online will address their security concerns.
P2P lending platforms can form a part of consumers’ online activity, serving everyday retail investors as well as sophisticated and high-net worth lenders.
As security fears grow, Experian has urged online lenders and other fintech firms to keep on top of their financial risk controls.
“Many consumers are more concerned now about the security of their online transactions and activities than they were a year ago,” said David Bernard, senior vice president of strategy and operations for global decision analytics at Experian.
“The past two years have given way to a digitally savvy consumer, who have a growing awareness and understanding of advanced, frictionless security methods.
“Consumers seek to make their work and lives easier and safer.”
Meanwhile, Nicola Horlick, chief executive of Money&Co, said the P2P platform conducts anti-money laundering checks on new lenders and updated checks annually on existing lenders.
- We start the new tax year with three loan auctions on site, from borrowers we have dealt with before.
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 66 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 47 per cent filled.
- Harris & Co has a credit rating of A, a yield of 8 per cent and a term of one year. It is currently 40 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.