Bright new digital dawns are the theme of the early part of the year. But the flip side is the possibility of dark night, as reported by our friends at Altfi, who examine the risks inherent in the digital technology embraced by challenger banks.
Concerns are growing that an Amazon Web Services (AWS) outage could one day take down more than just Netflix and Facebook.
According to a report in the Financial Times, the Bank of England’s Prudential Regulation Authority is looking at ways of assessing the “operational resilience” of cloud computing giants that have been edging their way into the financial services sector.
“We are looking at cloud providers from an operational resilience perspective,” a source told the FT. “Do we need to step in more, how do we get confidence in them? We are starting to consider them critical third parties that we need more oversight of.”
Of the UK challenger banks, Monzo and Starling are both held up as case studies by AWS, while Revolut is using Google Cloud for its cloud banking services and Microsoft Azure also has a growing number of financial services customers.
Reliance on these tech giants is even more acute further down the stack, with cloud banking providers like Thought Machine and Mambu relying on AWS for their services, which are in turn used by dozens of smaller fintechs.
The PRA has been engaging with banks and other regulated firms on their use of cloud-based services for a number of years.
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.