Amid the light, a patch of darkness. Even in the booming world of alternative finance, where FinTech is flavour of the month and digital banks appear to be booming all over the place, the news is not universally good.
Digital bank Monzo has issued another warning about its ability to continue as a going concern after reporting a £115 million loss for 2020/21.
Loss levels are broadly equivalent to those suffered last year, although revenue is now double that of the initial slump in April 2020, and 30% higher than pre-lockdown levels. For 2021 revenue increased by £12 million to £79 millione.
The company currently reports 200,000 paid subscribers to its premium accounts and added one million new customers over the year. Deposits are up 124%, increasing from £1.4 billion to £3.1 billion.
Yet uncertainties remain. In a directors statement, the group says: “We have losses today and expect to have more in the short term. Which is why we plan to raise the capital we need to support the business and meet our capital requirements in FY2022. There is a risk we can’t raise enough capital, on acceptable terms, when we plan to.”
The statement was recognised in the audit report: “These conditions indicate that a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern for a period of twelve months from when the financial statements are authorised for issue. Our opinion is not modified in respect of this matter.”
There may be more trouble brewing over regulatory failings, as Monzo reveals that the Financial Conduct Authority in May started an investigation into its compliance with money laundering rules.
Historical Performance And IFISA Process Guide
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.
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:
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.