The scramble to promote – and to develop in the financial community – awareness of digital money continues. Our friends at Finextra report on the latest move from the Bank for International Settlements, which has opened its third innovation hub in London.
Established in 2019 to support exploratory work into new frontiers in financial technology, BIS Innovation Hub Centres are already in place in Hong Kong, Singapore and Switzerland.
The Hub’s work programme is currently focused on six areas: use of technological innovation in supervision and regulation; next generation financial market infrastructures; central bank digital currencies; open finance; cyber security; and green finance.
Welcoming the London opening, UK Chancellor of the Exchequer Rishi Sunak, says: “The UK is known for pushing the boundaries of digital finance so it’s great to have the new Innovation Hub opening here. Its work will help central banks to support safe innovation, and boost our efforts to capture the extraordinary potential of technology.
The latest loan to land on site comes from a music publishing borrower. It’s a £500,000, two-year loan, rated A+ by our credit committee, with a fixed yield of eight per cent. It’s currently 23 per cent subscribed.
Historical Performance And IFISA Process Guide
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.
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.