The day will shortly dawn when the distinction between “alternative” and “mainstream” finance becomes meaningless. The established banks are stampeding into digital banking, open banking and the like. Meanwhile, “alternative” financial institutions – a category that includes Money&Co. – are seeking to broaden their product ranges to high-street levels.
Payments giant Stripe is launching a new bank transfer proposition in the UK and other markets, which it says will erase “the operational pain of receiving and manually reconciling transfers” for businesses.
Bank transfers, which have been in existence since 1871 when Western Union added money transfers to its telegram service, are still one of the most common ways to send money today.
According to Stripe, in Europe more than $4trillion in bank transfers is processed each year.
But the current process, says Stripe, is filled with “friction”- pointing to businesses losing hundreds of hours on confirming transfers, reconciliation and accounting, and refunds.
StrIpe’s new offering, already launched in Japan, is now being rolled out in the UK, EU and Mexico.
Loan Offer Latest
A loan offer from Harris & Co., a borrower that operates in the litigation claim sector, is available on site. The loan is risk-rated A by our credit committee. It has a gross yield of eight per cent, for a fixed term of 12 months. The loan offer is currently 14 per cent subscribed, and will close when filled.
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.