Where We Are Amid British Banks And Latest Innovations
British banking, British challenger banks, British alternative finance. Amid that general swirl of techie excitement is Money&Co., a peer-to-peer (P2P) lender turned niche lender/digital boutique bank (once we get that licence!).
Our friends at the Fintech Times report on the British Bank Awards, a category of which the FTT sponsored. We weren’t directly involved – but it’s an exciting area.
This year saw Monzo enjoy success in two of the biggest categories for the first time. Firstly, it scooped the highly coveted ‘Best British Bank’ award, sponsored by Folio, then the Monzo team took home the ‘Best Business Account’ gong. Monzo also secured the honour of ‘Best Banking App’, making the coral-coloured challenger bank the top winner for 2022 in the awards.
Starling Bank maintained its hold on the award for ‘Best Current Account’ for a fifth consecutive year, and also scooped the award for ‘Best Children’s Account’ for the first time for its Kite account which it launched in 2020.
The Fintech Times sponsored the category for ‘Innovation of the Year’, which Editor Claire Woffenden presented to the winner – money management app HyperJar, which launched in the UK in October 2020. Since launch, the app has introduced a range of innovative new features to the market and most recently HyperJar announced it was the first consumer account to offer routed spending, as well as ‘Only’ and ‘Block’ spending features within the app.
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.