Two Snapshots Of FinTech In A Covid-19 Environment

Fintechs will be “even more important” coming out of lockdown than they were during lockdown helping smaller businesses return to normality, according to the British Business Bank (BBB), which has reported a £2m loss in the year ending March 2020.

The government-backed bank, which is responsible for organising the CBILS, BBLS and other government emergency funding schemes, has updated the market on the impact that Covid-19 has had on financial institutions, businesses and its organisation in its annual report.

It cited fintechs as playing “an important part of delivering emergency schemes during the crisis” adding “they will be even more important in the recovery, when the UK’s smaller businesses will still need to be served by a healthy, competitive and diverse finance market.”

Starling Bank and OakNorth Bank are among the fintechs which have offered loans during the pandemic through the BBB.

The annual report covers the period to the year ending March 2020 but the BBB offers an update on the impact of Covid-19.

It said the Coronavirus Business Interruption Loan Scheme (CBILS) has 97 accredited lenders and, as of August 11, provided 60,000 loans worth £13.4bn.

The Coronavirus Large Business Interruption Loan Scheme (CLBILS), meanwhile, has 23 accredited lenders and has delivered 500 loans worth £3.4bn.

The Bounce Back Loan Scheme (BBLS) has given out over 1.1m loans worth £35bn while the Future Fund has delivered over £560m of funding to 565 businesses.

  • And now, some less inspiring (and arguably less surprising) words from UK Finance, reported by Finextra.

Bank trade association UK Finance is urging people to be aware of criminals exploiting Covid-19 after figures revealed a sharp rise in impersonation scams in the first half of the year.

There were almost 15,000 impersonation scam cases reported by UK Finance members between January and June 2020, an increase of 84% compared to the same period last year. Among these, more than 8000 involved criminals impersonating the police or a bank, a year-on-year rise of 94%. More than 6000 involved fraudsters imitating other trusted organisations such as a utility company or government department, an increase of 74%.

However, the amount lost to these scams saw only a modest rise, up three per cent to £58 million.

UK Finance says intelligence suggests that the rise in impersonation scams is being partly driven by criminals exploiting Covid-19. These scams include fraudsters sending emails or text messages pretending to be from government departments and offering grants related to Covid-19.

  • Our latest loan offering, the property-backed offering from WeBuyAnyHome.com, has attracted 22 per cent of the £150,000 it is seeking. The loan is rated A+ by our credit committee, and yields 8 per cent over a three-year term. For more detail, login.

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 £23 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 facilitated over £23 million – with only 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 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.



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Disclaimer: Money&Co.™ is the trading name of Denmark Square Limited, Company Number 08561817, registered in England & Wales, authorised and regulated by the Financial Conduct Authority (FCA). The company is identified on the Financial Services Register under Reference Number 727325. The registered office is 58 Glentham Road, Barnes, London, SW13 9JJ where the register of Directors may be inspected. Denmark Square Limited (ISA manager reference number Z1932) manages the Money&Co. Innovative Finance ISA.