Open banking is one of the hot topics in the FinTech sector. We’ve run several pieces on the topic, and opine regularly on it to trade publications. Today sees our friends at The Fintech Times showcase some open banking research from Tenemos:
Since its inception in 2018 in Europe through regulatory initiatives like PSD2 and Open Banking Standard in the UK, open banking has spread to over 50 countries globally. Open APIs have become the standard of collaboration in an increasingly busy financial ecosystem where banks, neobanks, fintechs, payment disruptors and the e-commerce and technology giants strive for dominance in different parts of the banking value chain. Banks are exploiting open banking to experiment with new business models to break into new markets, to consolidate market share in mature markets, or to defend against aggressive new entrants in others.
We are also now seeing the rise of embedded finance, with increasing demand for a unified customer-centric digital platform to deliver both financial and non-financial products and services. As embedded finance is spreading to consumer-facing brands and includes all financial products, such as mortgages, loans, pensions and insurance, Banking-as-a-service (BaaS) has risen from open banking framework. BaaS offers a different approach to financial services, deconstructing the traditional model and places the building blocks in the hands of a wider range of stakeholders.
In order to succeed in this new, BaaS world, all players in the open banking ecosystem require a cloud-native technology platform that is API first. This whitepaper discusses the rise of banking as a service, delving into the evolution and future of BaaS in the post-pandemic era.
Key insights from the whitepaper include:
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.