Another One Bites At Banking Licence – AltFi Going Mainstream
The ever-changing banking sector is where it’s at, folks. As regular visitors to this News site will know, a banking licence is on the horizon for this particular alternative-finance niche lender – and this is all part of the phenomenon of the alternative sector morphing into the mainstream.
Griffin – a UK Banking-as-a-Service (BaaS) fintech has submitted its application for a UK banking licence in a bid to become an official bank.
Founded by two Silicon Valley engineers David Jarvis and Allen Rohner, who previously co-founded tech unicorn CircleCI, Griffin has a team made up of former employees from the Bank of England – PRA, Nasdaq, Visa, HSBC, Form3, Monzo, SWIFT, GoCardless.
It first revealed its intentions to become a fully licensed bank in November 2020 with plans to be the go-to banking partner and offer financial compliance infrastructure to non-financial brands looking to move to offer financial services as well as fintechs not wanting to have to go through the lengthy process themselves.
Griffin’s BaaS platform is designed to provide fintechs with access to all the UK’s payment rails, bank accounts, debit cards, an integrated ledger, and customer onboarding automation.
“From the beginning, we’ve known that a full-stack approach delivers more value to customers.” said David Jarvis, CEO and co-founder of Griffin.
“Our platform brings historically siloed infrastructure components that all share a data model into a single platform, allowing fintechs to launch quickly without compromising on compliance or operational resilience. We’re incredibly proud to have reached this milestone in our journey to become a bank that our customers can build on,” he added.
The process for applying for a banking licence requires companies like Griffin to demonstrate that they meet key regulatory requirements and expectations. This includes effective governance arrangements, a viable and sustainable business model, adequate capital and liquidity and safe and secure infrastructure and operations.
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.