Mainstream Investors Continue Focus On FinTech Sector
Mainstream investors are of course paying more and more attention to FinTech opportunities. As part of the continuing theme we offer an extract from entirely uncontroversial opinion piece in AltFi that cites classics, such as “exit routes” as being desirable. Home truths…
Research from Innovate Finance shows that investment in UK fintech dropped by 39% in the first half of 2020, compared to the same period in 2019. In H1 2020, $1.8bn of venture capital was invested in 167 startups compared to H1 2019, when $3bn was invested in 263 startups.
However, it’s worth mentioning that the $1.8bn UK fintech investment earlier this year was still a 22% increase over the second half of 2019, when funding totalled $1.5bn. Therefore, all signs suggest that investors will make significant increases in capital investments during the rest ofsthe year.
Secondly, it appears that the current investor appetite is for more mature, later-stage fintechs: more than half of the $1.8bn went to just five companies: Revolut, Checkout.com, Starling Bank, Onfido and Thought Machine. Perhaps it is the ongoing economic uncertainty surrounding the COVID-19 crisis that is prompting inventors towards perceived “safer bets”, but what we do know for a fact is that early-stage fintechs raised just 8% of the total investments.
Is there a silver lining? The coronavirus crisis has rapidly accelerated the digitisation of financial services, with lockdown restrictions encouraging those previously resistant to engage with digital financial services. The stage is set for fintechs to thrive and deliver offerings that meet shifting consumer demands. To be in with a shot of wooing investors, fintechs will need to demonstrate certain qualities that set them apart from other companies.
Loan Latest
- Our latest loan offering, the property-backed offering from WeBuyAnyHome.com, has attracted 31 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 £20 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 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.