Starling Seeks To Snap Up Lending Platform
Times are certainly interesting in the world of alternative finance. Starling Bank, one of the UK’s leading digital banks, has already demonstrated impressive organic growth – and has recently announced aggressive expansion plans.
Starling Bank has set its sights on buying a lending platform and is also hiring in Dublin ahead of an anticipated move into Europe, CEO Anne Boden has revealed at Money 20/20 Europe.
Ever the atypical fintech poster child, Boden told the Money 20/20 crowd that Starling’s strategy was always to be an unfashionably profitable neo-bank.
Unlike many of its peers, Starling has focused upon individual customer profitability before customer acquisition and, as a result, now has 18 months of profits under its belt. With much chatter at Money 20/20 about revaluations, cash raises (or not) and IPOs disappearing over the horizon, the merit of Starling’s position was not lost on Boden’s audience.
Having already achieved what Boden called profitable critical mass in the UK marketplace – a three per cent share of the retail market and eight per cent of the SMB sector – and with healthy inflows of depositors’ funds, the challenge now is to deploy that capital.
The firm has so far bought the home loans portfolio from Kensington Mortgages, and buy-to-let specialist Fleet Mortgages.
Now, Boden has specifically called out a lending platform as being the most immediate acquisition target.
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 7 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.