Advisers

on the rebuildingsociety.com blog

12th Jan, 2017

FinTech North 2017

Following the success of the inaugural event in 2016, FinTech North 2017 is once again set to take place during Leeds Digital Festival week and aims to attract 350 delegates and support from the FinTech community in the Leeds City Region, across the UK, and internationally.

FinTech North 2017 will be hosted on the 26th April 2017 at aql in Leeds. The goal of the event is to generate collaboration and knowledge share within the financial services and technology community and to generate tangible economic benefits for the region.

The agenda for the one day conference will feature a number of well-known keynote speakers who will cover topics including innovation, alternative finance, big data and analytics, machine learning, digital identity and authentication.

View the 2016 FinTech North video:

 

In recent months the interest and activity in the FinTech arena in Leeds has heightened, with developments including the publication of a FinExtra report into FinTech in the Leeds City Region and the announcement of a new Digital Laboratory which is being led by Finexus and has gained high profile corporate support.

Julian Wells, Director of Whitecap Consulting, says: “There is a strong desire by numerous stakeholders in the Leeds City Region to increase the profile, capability and economic value of FinTech in the region. This year by launching FinTech North we laid the foundations which will enable us to deliver an even more impactful event in 2017 and help put FinTech firmly at the heart of the northern digital economy – particularly the Leeds City Region – making it attractive to UK and international organisations.”

Dr Chris Sier, Director of FiNexus and FinTech Envoy for the Northern Powerhouse, who spoke at FinTech North and will chair the 2017 event, says: “Opportunity was a theme from every speaker at FinTech North 2016. The challenge for Leeds is to work together to ensure our City has the best chance of exploiting the opportunity to become a true FinTech centre of excellence.”

ecafad45be23171716aab6dfeff8a0cfd118c7e0
Nearly 200 business leaders attended the first FinTech North conference in Leeds, and speakers and delegates were drawn from places as diverse as Estonia, Germany, London and Manchester.

Dan Rajkumar, Managing Director of rebuildingsociety.com and White Label Crowdfunding, summed up why the next FinTech North event will be a great opportunity for the region: “There is no doubt Leeds is now seen as a key FinTech and digital leader outside London both for infrastructure and talent. FinTech North 2017 will provide the delegates with a fascinating day of insight and the opportunity to network with industry peers and some of the region’s best known FinTech companies and governmental bodies.”

Registration for FinTech North 2017 is now open – click here to book your free place.

For speaking and sponsorship opportunities, please contact Whitecap Consulting.


23rd Nov, 2016

The A-E of Reasons to Take a Business Loan

 Asset Purchase

Assets can often be purchased through a hire purchase agreement, but where this option is unavailable a business loan can fill the funding gap and allow you to spread the cost of potentially expensive equipment.  In some instances the asset can act as security for the loan which will somewhat reduce the risk.

In 2015 more than £29 billion in finance was provided by members of the The Finance & Leasing Association to assist with asset purchases.  This figure is further boosted by the work being carried out by the Peer-to-Peer funders who offer an alternative route to finance outside of the traditional sources.

Business Acquisition

Business acquisition is the process of acquiring another company in order to build on strengths or weaknesses of the acquiring company.  The aim is often to aid growth in a quicker manner than would normally occur organically. We have also supported new business owners who are able to show experience in their field of purchase and where security is strong to support the acquisition.

Cash Flow

Successful businesses typically have a healthy cash flow, but even the best run businesses can experience fluctuations and cash flow finance can be an effective way to ease cash flow issues during busy periods.  For short term options, businesses can use credit cards and overdrafts where appropriate.  Longer term requirements such as construction firms covering a shortfall before they are paid by their customers and import/export or retail businesses making large inventory purchases to save money a loan can offer timely support to help plug this gap in finance. Another popular option is invoice financing and it’s important to consider the best fit for your organisation before entering in to any agreements.

Debt Consolidation

A fairly common use of a loan is to consolidate other debt.  This may seem confusing but there are three main reasons why a business may wish to take this route; businesses can spread the cost of an expensive loan over a longer period, combine several smaller loans into one more manageable loan or they may wish to refinance at a better rate.

Some debt consolidation companies have a bad reputation and Money Saving Expert, Martin Lewis rightly warns his readers to be wary of these in this excellent piece on his website.

The key here is to make sure the deal is the right one for you.  Are the savings on the monthly payments going to help you and your business to succeed? Once you have considered the likely rate and repayments on the consolidation loan you will be in a better position to decide if this is the right move for you, but whatever you do, do not blindly accept a deal without considering the benefits or potential pitfalls.

Expansion

If you are looking to grow your business, expansion can take many forms.  There are a plethora of options for expansion including taking on new employees, larger offices, additional sites, product diversification and taking your product online.  You may find a cash injection from a loan helpful in achieving your desired growth. It can help to pay for the new revenue stream in it’s early stages before it starts to pay for itself and could help you to achieve your planned expansion earlier than you may have through organic growth.

Before taking a loan for expansion you should be confident that you have planned effectively and considered the relative risks and challenges.  If the expansion is unsuccessful for any reason you will still be expected to pay the remainder of the loan from your existing profit, so it is vital that there is a clear route to profit before accepting finance to fund the project.

If you are a business looking for funds, bypass the banks and get a better deal in just a few days, call us at 0113 8150 244 or start your online loan application today here


11th Nov, 2016

The Return of an International Sweet Treat

In 2014, Candy Hero Ltd. came to rebuildingsociety.com looking for an influx of funds in order to expand. They planned to use the investment to boost wholesale sales, strengthen equity and then open a new UK store in time to maximise Christmas time sales.

Candy Hero Ltd. was founded in December 2008, by two entrepreneurial siblings with a mission to bring unique, specialist and delicious sweets from all over the world to sweet-toothed customers in the UK and Europe.

The online shop was launched in 2009, to be followed later by high street shops in York and Leeds. Visit one of their shops, and prepare to be tempted by Birthday Cake Golden Oreos, exploding cinnamon candy, Nerds, giant lollipops, wasabi candy and boxes of Jelly Belly Buttered Popcorn Jelly Beans, to name just a few from the vast collection. The 10,000 square foot warehouse in Bradford sees around 4,000 unique product lines carefully handled by employees individually chosen to fit the company’s high energy, innovative ethos.


The sweet importers and retailers’ first loan application was a great success; brothers and co-owners Frank and Leo managed to raise the target £50,000 from investors. Candy Hero Ltd. invested the money they raised into the wholesale distribution of imported sweets, snacks, and groceries. They decided not to open a shop, as they were unable to find an adequate unit within their chosen city. Instead, they focused on their online sector. In the last two years, the company has:

  • grown turnover significantly; 2015 to 2016 saw 83% growth
  • increased their stock-holding capacity from 5,000 to 10,000 square feet
  • acquired a great number of additional wholesale customers
  • built a proprietary pre-order system
  • co-ordinated a huge UK product range comprising around 10,000 lines available for pre-order and export
  • improved internal systems with strong procedures that improve staff training processes
  • added powerful price and margin controls and mitigated currency fluctuations

Frank commented on their experiences with rebuildingsociety:

“They provided a smooth process prior to listing the application, support throughout, and a platform that is clear and easy-to-use. Rebuildingsociety is a very impressive social business that is a powerful tool when you need extra finance above and beyond what may have been already possible.”

Perhaps one of the keys to their online funding success was the company’s open-door policy. Frank discusses business with his team quite openly, “from the top to the bottom of the organisation, in response to any question.” Therefore, he embraced the discussion forums available on rebuildingsociety.com, believing that “talking business with lenders in a peer-to-peer environment with the same openness and clarity builds up the confidence to invest in us.”

Now, Candy Hero is back with a new loan application. The return borrowers are well-supported by rebuildingsociety’s lender base, something they hope will help them fund their £300,000 loan application. If successful, the team plan to refinance £184,000 to achieve cheaper interest per month and fewer capital repayments per month, and use additional capital to add to the stock cycle.

When asked why they decided to return to Rebuildingsociety, Frank explained that while their bank is very supportive, recently offering them a new import loan facility, they cannot approve a loan of this size. As he commented: “The only method of gaining a loan of this size would be crowdfunding and the only place I want to crowdfund is Rebuildingsociety.”

Read about the company on their website, and find out more about their loan application at rebuildingsociety.com.

Lending to businesses carries risk. Past returns are not necessarily a guide to future returns. Any unrepaid capital is at risk of arrears or default. To find out more please visit http://reb.so/risk


24th Oct, 2016

Changes to the Marketplace

We’ve been working hard to bring you good quality borrowing applications for you to consider. Currently businesses that are eligible to borrow through rebuildingsociety.com, must have at least two years history, an average turnover of £50,000 a quarter and offer at least a personal guarantee as security. The average final rate paid by borrowers on our loan book is over 20% APR*, this rate is paid usually regardless of the security offered in support of the loan.

Currently, the risk rating given to the borrower drives the maximum starting rate for bids. To incentivise applicant borrowers to offer more or better security we are introducing a modifier to the maximum rate ceiling on the loan auction.

Whilst we currently take security into account during the underwriting process, it is not a significant factor in determining the risk rating given to the borrower, and therefore has little bearing on the cost of the finance.

From the 26th October 2016, the starting rate on a loan will be driven by the security strength and Loan To Value (LTV) score of the security rather than the final risk rating. The underwriting of the loan will be done in the same manner as before and risk ratings between A+ and C will continue. The weightings attributed to the determination of the Risk Rating in our model will remain unchanged, therefore a loan that was rated as C risk earlier, will still be rated as a C rated loan, allowing you still to view the suggested relative risk of the business.

The Changes in Practice

What is it?

A new borrower incentive to encourage borrowers to offer more and better security in support of their loan.

How does it work?

The borrower can offer a wide variety of security to support their loan. We’ve assigned a nominal value to the different types of security, making some security ‘more valuable’ than others. For example a 1st charge on a property will be deemed a more valuable form of security than a company debenture, and as such they will be rewarded with a lower starting interest rate.
The more security added, the more the starting rate will be reduced* as the security added works in a cumulative way linked to the loan to value ratio.
The starting maximum rate will never be modified lower than 5% of the standard maximum rates, which are currently as follows:

  • A+ = Max rate 11%
  • A= Max rate 14%
  • B= Max rate 17%
  • C= Max rate 20%

Therefore a C rated loan will never have a maximum starting rate of less than 15%.

The security we can accept from a borrower is ranked in priority below.

  • 1st Charge Commercial Property
  • 1st Charge Non Residential Property
  • 2nd Charge Commercial Property
  • 2nd Charge Non Residential Property
  • 1st Charge Residential Property
  • Fixed Asset Debenture
  • 2nd Charge Residential Property
  • All Assets Fixed and Floating Debenture
  • Corporate Guarantee
  • Personal Guarantee Insurance

Therefore, depending on the LTV on the security, a 1st legal charge taken on a commercial property in support of a loan will be ranked higher than a loan with an All Assets Debenture and may be achieve a lower maximum loan rate. Similarly, based on the above a loan secured on a 1st charge non residential property with an exceptional LTV will not achieve a better rate than a loan secured on a 1st commercial charge that also has an exceptional LTV, unless the former is accompanied by additional security.

Personal Guarantee’s do not qualify for a reduction in the interest rate as this is a mandatory requirement for all loans.

Why are we introducing it?

We have received feedback that the security being offered should have a more direct effect on the rate of loans. As such, we are rewarding borrowers who choose to back their loan with additional security. In the long run this should result in a higher percentage of secured loans and an increased rate of recovery.

When will it be introduced?

The security discount will apply to all new loans from Wednesday 26th October 2016.

How will this affect you and your use of the site?

The bidding process of the site remains unchanged as does indicative risk rating given to each loan, the only change will be the maximum starting rate of any loan that achieves the reward.

Will this be applied to historic loans?

No, but existing borrowers who reapply for new finance may qualify for the ceiling rate reduction.

Will this reduce my returns?

We expect any reduction in average gross returns to be offset by an improvement in net returns.

As ever you should always review each loan application in detail before lending. Where you have questions in regard to an application you should put these to the borrower via the discussion forum on each application.

If you have not already done so, please read more about the risks associated with lending to businesses.


26th Sep, 2016

Financial Services Regulation. What does it mean for you as a consumer?

FCA, TCF, FOS, OFT, PRA…As a lender on a Peer to Peer site, these are all acronyms you may have come across. But do you know what they stand for and what the regulation means for you as a lender? In this post, we take a closer look.

The Financial Conduct Authority (aka The FCA) were formally known as the Financial Service Authority and the Office of Fair Trading (OFT).

In 2013, the FCA was formed, taking over the operations of the FSA and the OFT and at the same time also creating the PRA, the Prudential Regulatory Authority, the authority that regulates the banks and insurers.

The FCA (who are directly accountable to HM Treasury and Parliament) aim to secure an appropriate degree of protection for consumers, protect and enhance the integrity of the UK Financial System and promote effective competition.

In 2013, the FCA announced that it planned to regulate the previously unregulated crowdfunding sector, including both the equity and debt-based sides of the market. Rebuildingsociety.com, having operated since late 2012, fell under the new regulation and authority of the FCA. As rebuildingsociety.com was already trading under the supervision of the OFT, it was granted Interim Permission and invited to apply for full permissions in October 2014.

So, how does the FCA go about ensuring that the firms under its supervision protect consumers (you)?

All firms under the authority of the FCA must meet the minimum applicable standards as set out in their Regulatory Handbook. The Regulatory Handbook is driven directly from legislation, primarily the Financial Services and Markets Act 2000 (FSMA). The handbook acts somewhat like a Bible for regulated firms, setting out how it should handle client money, how it must manage its promotional activity and communicate to their clients, to name but a few of the rules set out in the extensive Handbook.

Some of the most prevalent rules that go towards protecting consumers are the rules on Treating Customers Fairly (TCF) and Financial Promotions. These rules, if not followed, can result in firms facing penalties and restrictions and as such are taken seriously by regulated firms.

Treating Customers Fairly

TCF rules aim to raise the standards by which firms carry out their business. The TCF rules are driven by 6 outcomes that firms should measure their performance against. These principles aim to help you fully understand the features, benefits, risks and costs of the financial products you buy and minimise the sale of unsuitable products by encouraging best practice before, during and after a sale.

What are the 6 Outcomes?

  • 1. Consumers can be confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture.

Whilst this outcome may seem obvious at first, it is central to the FCA’s core mission to protect consumers. The FCA insist that firms make fair treatment of consumers core to their corporate culture and not merely a box ticking exercise to satisfy the regulator.

Firms are expected to ensure that all staff act honestly and with integrity and deliver a high standard of service to clients.

  • 2.Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly.

This means that firms must not sell financial products to customers who do not need them, nor sell products that are not suitable to their specific needs.

This puts the responsibility on firms to ensure that they know their customers and their needs, so that they are not burdened with products or services that they do not actually need. For an obvious example, a firm should not sell a Pay Day Loan to a customer who does not have a job.

If you think back to PPI, or to the mis-selling of mortgages and the effect of the collapse of this market, you can see the importance of this principle clearly illustrated by the consequences of previous failures.

  • 3.Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale.

You may have heard of the Latin Phrase, ‘Caveat Emptor’ roughly translated to ‘Buyer beware’. This is exactly the type of behavior that the FCA is trying to remove from the financial services sector. They want to ensure that firms do not hide important details in the small print.

Customers should be made aware of all costs, penalties and terms before entering into an agreement to ensure that they are fully aware of what they are committing to or should expect throughout the term of the product or service.

  • 4. Where customers receive advice, the advice is suitable and takes account of their circumstances.

Entering into a contract for a financial service or product is one of the most important contracts that many of us enter into. Think Mortgage, Life Insurance or Pension. As such, it goes without saying that when doing so you expect to be given advice that is suitable and tailored to your needs so that you are able to make an informed decision.

Firms that fail on this principle are subject to exceptional penalties.

  • 5. Consumers are provided with products that perform as firms have led them to expect, and the associated service is both of an acceptable standard and as they have been led to expect.

When you buy a financial product or service you should expect to get what you expected when you bought it. So if you open a savings account that you are told will yield a certain amount of interest each year, your savings account should deliver as expected.

  • 6.Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.

Firms must make it easy for customers to change providers, make a claim or submit a complaint.

Matters concerning financial products and services are often time sensitive and as such firms should react in a reasonable manner so as not to cause major inconvenience for their customers.

At rebuildingsociety.com, TCF is in our DNA. We’re always striving to improve your experience of the site and the service you receive from us. If you don’t think that we are meeting your expectations we’d like to hear from you so that we can put it right.

You can contact us either by phone or email, all details are available on our Contact Us Page.


01st Sep, 2016

Do You Know… What we look for?

There is a lot of work which goes on behind the scenes from the point when an application is first submitted until the point at when it goes live on the marketplace.

To give you an idea of the time involved, the borrower team spend an average of nine days on the assessment phase of an application, from the initial submission to listing.

This time is spent analysing the prospective borrower’s submissions, assessing the accounts and security submitted, asking pertinent questions about the business, liaising with the applicant to get more information on their business or additional security to support their application and, when identified, requesting amended accounts in circumstances where accounting errors are spotted, to ensure that the figures presented to lenders are as fair and accurate as possible.

First and foremost, however, a listing must meet our basic lending criteria, and we filter out those that don’t at the first instance. Our five basic criteria are as follows:

1) The applicant must be a limited company.

We do not offer loans to partnerships, sole traders or individuals. Limited companies are by law separate legal entities from their directors or shareholders. This means that there is a clear legal distinction between personal finances and the finances of the business. We can assess the strength of the business purely on its own merits and look at the personal finances of any directors or shareholders separately to assess the suitability of security.

A Limited company is required by law to produce fair and accurate accounts to be filed at Companies House available to the public record every year, along with an Annual Return listing directors and shareholders. This allows us to cross-reference accounts submitted by applicants with those filed at Companies House, an important security check we conduct on every application before listing.

2) The company must have two years or more of trading history.

Recent statistics suggest that up to nine out of every ten start-up businesses will not survive past the first two years. The risk of failure usually reduces after each year of successful trading. We require all businesses we list to have at least two years of prior trading history. This allows us to mitigate the risk of failure by only listing businesses which have already survived the most risky period. It also gives us at least two years of business accounts to assess, and lets our underwriting team get a more accurate idea of the business, adjusting for one unusually good or bad trading year.

3) The business must be profitable and must have a turnover sufficient for our affordability criteria.

As part of our lending criteria, we require that every business we list must have made a profit in the last two years of trading. On top of this, we also use our bespoke risk tool to calculate whether the loan repayments are affordable, taking into account factors such as the business’ turnover, net profit, liquidity and the equity/debt ratio.

4) The business must meet our risk rating requirements.

Along with affordability calculations, our bespoke risk tool also gives each application a risk grade from A+ to F-, factoring in a myriad of criteria from turnover, profitability and growth to liquidity, credit rating, repayment history and creditworthiness.

Any business which scores a D+ or below is rejected. If a business scores C- or higher, should it also meet our security and affordability criteria, it is listed on the marketplace with the appropriate risk rating.

5) The business must also meet our security requirements

Before making it on to the marketplace, businesses must fully satisfy our security requirements, which are considerably higher than most of our competitors. Firstly, unlike some other platforms, all of our loans are backed by Personal Guarantees as a minimum. For any loan request in excess of £50,000, we also require additional security in the form of a Debenture or a Legal Charge over Property.

In addition, in order to try and ensure the greatest prospect of recovery should a loan default, we also require that the total value of all security offered must cover the full loan amount requested. Our underwriters determine the value of each form of security offered by a prospective borrower and should the sum be less than the full loan amount, the borrower will be notified that additional security will be required in order to list.

The above 5 steps are just the first part of underwriting process. Once these initial checks have been done, the application is then pre-approved to undergo further, more stringent assessment.


07th Aug, 2015

P2P Weekly: Leaders aim to get ahead of Treasury Department concerns, and other stories

Our weekly round-up of peer-to-peer and crowdfunding news.

Peer-to-peer lenders get ahead of regulation with voluntary code, Yahoo Finance

U.S. peer-to-peer lenders have released a list of six best practice guidelines that lenders can use to protect borrowers. The announcement comes on the heels of news that the U.S. Treasury Depart is gathering more information about peer-to-peer lending. The “Small Business Borrowers’ Bill of Rights” calls for more transparency, responsible underwriting and non-discriminatory access to credit, among other safeguards.

“China seeks to tame online financial risks,” Financial Times

China’s move toward regulation of online lending both legitimizes a growing industry and indicates the government’s support of traditional banks.

“Regulation will standardise operations and expose the industry to sunlight. Practices that were seen as existing in a grey area will be forbidden,” says Xu Hongwei, chief executive of Online Lending House, a website that tracks the P2P industry. “But regulation will also increase operating costs, causing some of the lower ranking and weaker players who can’t make the cut to go bankrupt. And it will raise barriers to entry. Average people won’t be able to get in any more.”

“The Wired 100,” Wired

Wired is releasing its annual list of 100 most influential people in tech-related fields, and this year UK-based P2P service Funding Circle Team made the list at number 92. Wired notes, “Funding Circle now has access to over 38,000 investors, who lent £100m to small businesses in Q1 2015 alone. The company hopes to hit $1bn in loans this year.”

“Brazil’s BankFacil Secures $3M, Launches Low-Rate Consumer Loans,” Wall Street Journal

BankFacil has raised venture capital so it can make consumer loans easier and cheaper. The three-year-old online lending startup mostly competes with banks, as alternative finance is a nascent industry in Brazil. Founder and CEO Sergio Furio hopes to secure a large enough volume of loans to be able to offer markedly better interest rates than other lenders, including banks.

“The UK is beating the US in the peer-to-peer alternative lending market — here’s why,” Business Insider

The UK is generating 72 percent more P2P lending capital per capita than the U.S., according to new research from Business Insider. Several factors, including a friendly regulatory environment, very high rate of online access and early adoption contribute to this. Business Insider subscribers can read the full report.


24th Jul, 2015

P2P Weekly: UK to create trustmark for crowd-based businesses, and other news

“UK to create trustmark for app businesses in ‘sharing economy’”, Financial Times

“Minimum requirements for the UK trustmark will be set by a team from the Skoll Centre for Social Entrepreneurship at Oxford university’s Said Business School, working in partnership with the recently created trade body Sharing Economy UK,” the FT reports. Business secretary Sajid Javid backs the move, noting his commitment to making the UK a friendly place for a robust crowdfunding economy. The trustmark would aim to give users of services like taxi-alternative Uber and crowdfunding and peer-to-peer sites more confidence in which services to choose.

“Kiva Co-founder on the Future of Microfinance,” Mic

In a Q&A, Jessica Jackley sounds off on Kiva’s success, the future of microfinance and her new book. Of the industry’s future, she says: “As it is with many things these days, it will be more mobile and lighter weight. There will be different ways of categorizing and weighting reputation, not just in terms of credit scoring.”

“Smithsonian Resorts To Kickstarter to Restore Armstrong Spacesuit,” Buzzfeed

The Smithsonian, the United States’ premier historical and preservation organization, has turned to Kickstarter to fund the restoration and display of the spacesuit Neil Armstrong wore on the moon. The institution has funding to preserve the suit, but hopes to raise $500,000 to prepare the suit for display during the moonwalk’s 50th anniversary in 2019. It’s the first of several planned collaborations with Kickstarter, museum officials stated.

“Crowdfunding as a vehicle for protest,” Los Angeles Times
Individuals supporting both liberal and conservative causes and individuals have turned to crowdfunding to show their support, in addition to or even instead of other forms of protest and solidarity. The Times sites several high profile examples of campaigns, successful and not, to use crowdfunding to support anti-gay businesses and police officers accused (and in some cases convicted) of racist violence.


15th Jul, 2015

New budget brightens outlook for peer to peer lending

In the midst of ongoing debate about the new budget announced last week, peer to peer lenders and borrowers can take comfort in a new program that will boost security and reliability in the industry.

Starting April 6 2016, the government will operate the Innovative Finance ISA, which extends ISA eligibility to peer to peer loans. The chancellor’s office is also investigating whether to add crowdfunded debt securities and equities to the list of eligible transactions. For rebuildingsociety.com and other peer to peer lending operations, this is welcome news.

“The announcement to launch the Innovative Finance ISA is major step forwards for savers looking to earn a passive income from their interest earnings,” said rebuildingsociety.com Managing Director Daniel Rajkumar. “Without the volatility of share prices and with continuously compounding yields, the Innovative Finance ISA has the potential to outperform others, where traditional financial institutions have creamed the margins for too long.”

Leaders of other platforms have also been outspoken in their support of the move.

“The Chancellor seems determined to unblock finance, allow innovation to flourish and crucially give savers and investors more control over their money. I see the Innovative Finance ISA as part of that new spirit,” said RateSetter CEO Rhydian Lewis. “It will be an immediate boost for hundreds of thousands of everyday investors and has the potential to move the dial on the availability of small business and personal finance in this country.”

The addition of the Innovative Finance ISA is just one small piece of a complicated budget plan that has seen some debate as to its likely impacts. We’ll have our eyes on whether other crowdfunding and peer to peer transactions become eligible for ISAs, and look forward to the launch of the Innovative Finance ISA next year.


09th Jul, 2015

Alternative Finance Ramps Up Competition With Banks

The threat to traditional banking is growing.

From PayPal to peer to peer lending, methods of money management outside of traditional banks have boomed in the last few years. While evidence that they’re creating competition that threatens banks’ foothold in the economic market is still growing, they are expanding options and forcing banks to think smarter as customers begin exploring new ways of storing, transmitting and growing their money.

And peer to peer lending and other programs certainly have banks’ attention. In recent comments, the CEO of the Canadian Imperial Bank of Commerce confirmed that banks will have to adjust to new competition from peer to peer and other markets. Victor Dodig said the bank is looking for ways to leverage interest in Bitcoin and other new technologies to its benefit.

““We can play in that space,” Dodig says. “Will clients move in droves to these new technology platforms to do their lending? I don’t think so.” But, he adds, “Competition always changes the dynamic on pricing. Will there be pressure over time? Of course there will be.”

Other platforms, like Apple Pay and Google Wallet, have facilitated millions of transactions around the world. Executives from Accenture noted that “As banks recover from the downturn, non-banks are taking advantage by proceeding aggressively with digital innovations and capturing more and more of the banking value chain. Accenture estimates that competition from non-banks could erode one-third of traditional bank revenues by 2020.”

Digital wallet services from Google, Apple, Samsung and more have become part of people’s daily payment processes. Each has slightly different offerings in terms of security, ease of use, and compatibility with different devices, digital apps and services. Google continues to tweak Wallet, since it hasn’t been as successful as originally predicted. Of course, many such services integrate directly with bank accounts and existing credit cards, functioning more as an intermediary than an entirely new money management method.

Dodig argues that one deterrent for new financial systems like peer to peer is ongoing uncertainty about security and financial regulations: “Clients that have money with an institution want to make sure that it’s stable and secure, because (deposit) insurance only gives you protection to a certain level,” said Dodig.

However, over time, regulations are becoming clearer and alternative financial models are demonstrating their success and security. rebuildingsociety’s Digital Marketing Manager, Adam Knott, said: “Banks are keeping a keen eye on institutions like rebuildingsociety.com, because they realize the potential for disruption and competition as more individuals and organizations reduce their reliance on traditional banking.”


iJr/wxVFQTOM5jn615ZUUYvhzAbLnOkhpupFfzj4qbw=