Open Banking In UK Gets ‘Hurry Up’ Call
The UK’s progress in developing open banking comes in for some implicit criticism in this piece by our friends at Altfi, who look abroad for comparisons.
Action is required to avoid the UK falling behind other open banking regimes like Australia and South Korea, according to policy group Coadec.
The UK’s open banking industry, which has been a standout leader in the trend, needs to be refined in order to further its potential, the group says.
This includes removing the 90-day re-authentication requirement and more proactive enforcement by the FCA.
Nearly four million UK consumers have used open banking solutions over the last three years but the potential of open finance will only be realised with a Smart Data Right, with consumers limited in what they can currently consent to share securely.
In total 24 fintechs and other industry bodies have also signed an open letter to Paul Scully, Minister responsible for Smart Data, and John Glen, Economic Secretary to the Treasury, advocating for a Smart Data Right in the 2022 Queen’s Speech.
Signatories to the letter include: Coadec, Aire, Butter, Chip, Codat, Crezco, Fluidly, Fronted, Innovate Finance, iSpent19, Klarna, LoyalBe, Monzo, PensionBee, Plaid, Plend, Plum, Revolut, Snoop, Tomato Pay, Truelayer, Untied, Wise, Yapily and Youtility.
The second tranche of the Fleetwood Legal £250,000 loan offering is now 21 per cent filled. The loan offering is rated A with a yield of 8 per cent and a 12-month term. Please note that ‘Fleetwood Legal’ is a code name for commercial reasons.
Money&Co. lenders have been funding legal claims since May 2019. Over that period, and despite the issues that affected the courts at the start of the pandemic, all of the money lent has been returned to our lenders with an average rate of interest of 7.85% before fees.Fleetwood Legal (FL) has an A rating from our credit committee and offers a yield of eight per cent over its one-year term. Below we offer an extract from our credit analysis. Readers wishing to see the full note and to subscribe to this offer must log in (or register if you are a first-time lender).
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.