Regulators Increase Oversight Of FinTech, Cryptos In Post-Covid World
Financial regulatory authorities are trying hard to keep up with – or even stay ahead of – the pace of change in the digital aspects of FinTech.
Increased vigilance is the least that should be happening, for a number of good reasons.
The pandemic has prompted a wave of new people towards fintech investment apps. But this younger generation of investors are taking on bigger financial risks than they should, the Financial Conduct Authority (FCA), the UK financial regulator, has warned.
Research from the FCA says a younger cohort of people, more skewed more towards being female, under 40 and from a BAME background, are looking more to financial investment products.
It flags cryptocurrencies and foreign exchange as particular areas of concern as well as saying that 38 per cent of those surveyed did not list a single “functional reason” for investing in their top three reasons. In addition, more than 4 in 10 did not view ‘losing some money’ as one of the risks of investing.
- And in other news, Crypto-friendly digital payments company Wirex has been forced to pause the onboarding of new clients in the UK at the behest of the Financial Conduct Authority. The purpose of the clampdown, according to Finextra is to strengthen anti-money laundering controls:
The FCA took on supervisory responsibility for anti-money laundering in January last year and required existing crypto businesses to register with it by 15 December this year in order to enforce compliance.
The Wirex app allows users to buy, exchange and spend both cryptocurrencies and traditional fiat currencies in conjunction with a multicurrency payment card.
The company – which serves nearly 3.5 million customers worldwide – says it will dedicate resources to further strengthen its 5AMLD compliance protocols.
Latest Loan Offer
The latest loan offer on site has an A-rating and an annual rate of interest of 7 per cent. The term of the loan is 12 months. The offer, just launched, is now 60 per cent filled.
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 £20 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.