The UK’s leading financial regulator the Financial Conduct Authority (FCA) has introduced a liberal measure that many in the industry see as a major stimulus for the growth of open banking. This will see further convergence between the alternative-finance sector and the mainstream.
[The FCA] is looking to scrap a key open banking rule requiring users to reauthenticate access to customer accounts every 90 days.
While the growth of open banking in the UK has been well documented, many industry insiders have longed said the ‘90 rule’, which seeks to maintain and protect users’ permissions, has been a drag on the adoption of open banking. This is because of the added friction for users needing to re-apply the permissions.
The ’90-day’ rule came into force in 2018. Aggregator apps were instantly forced to send their customers to re-authenticate with each bank every 90-days. The impact was immediate and negative for adoption owing to the added inconvenience.
Drop off rates (where customers decided to stop using open banking) were above 50 per cent, affecting even the highly engaged consumers.
The new rules come after an ongoing consultation by the FCA with the open banking industry. From 26th March 2022, banks will only have authenticate for the first access request of an account information service provider.
The lender is seeking to fund claims for financial mis-selling. The term of the loan is 15 months.
Below are some details from the borrower’s pitch – as ever, we’ve done due diligence but cannot warrant or guarantee the truth of the representations. For full detail, register or log in here.
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.