Is this the future of consumer-facing FinTech? HSBC is rolling out a platform for “yield-hungry investors”. Well, maybe – but with a track record of just 0.03 per cent of annualised bad debt and lenders’ gross yields averaging more than 8 per cent over the $19 million and five years of operation, we think we’re on to a good thing at Money&Co.
Judge for yourselves. Our friends at Venture Beat take up the story.
HSBC aims to shift $20 billion worth of assets to a new blockchain-based custody platform by March, in one of the biggest deployments yet of the widely-hyped but still unproven technology by a global bank.
The platform, known as Digital Vault, will give investors real-time access to records of securities bought on private markets, HSBC told Reuters, and seeks to capitalize on booming interest in such investments by yield-hungry investors.
Banks and other financial firms have invested billions of dollars into finding uses for blockchain, a digital ledger that can be instantly and transparently updated. Few, however, have come up with practical or widely-used applications.
Proponents say the blockchain will upend the financial sector by cutting out costly processes or the need for middlemen – though there have been few solid examples yet of such revolutionary use.
The HSBC platform will digitize paper-based records of private placements, using blockchain to reduce the time it takes investors to make checks or queries on holdings.
Mar-Key 6, rated A+, is 31 per cent filled at the time of writing. The yield on offer is 7 percent. Platform lending of the kind we facilitate here at Money&Co. can be a lucrative activity. The average yield achieved by our registered lenders over more than five years of loan facilitation on this platform is more than 8 per cent, before we deduct our one per cent charge. That return has handsomely outperformed retail price inflation, which has averaged around two per cent over this time.
Historical Performance And IFISA Process Guide
That figure is the result of over £19 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 2019/20 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.