Telegraph Hub: Eleven Top Trends In Managing Your Money

Author

Date

29th September 2016

ArchOver has teamed up with The Telegraph to produce a series of articles to help educate investors on the UK Peer-to-Peer Lending sector. In a brave new economic and financial world, understanding different ways of managing your money is key to success. Peer-to-Peer Lending can help both individuals and businesses navigate a post-Brexit world, with the reassurance that it is a secured and effective method of protecting and growing your money.

From chatbot banking to peer-to-peer lending, this year has seen some major shifts in the way people are taking care of their money.

Thanks to landmark events such as the Brexit vote and an interest rate cut, as well as the constant evolution of new technology, 2016 has already seen some major changes in how we manage our money. Here are 10 of the top trends.

Power to the people

The disintermediation revolution that swept through media and publishing has come to financial services. More people are taking control of their money and their investments, and, in a few years, we’ll look back on paying fund managers, independent financial advisers and the like as simply ludicrous. This of course, is a technology-based revolution – one led, incidentally, by a 300-plus-year-old institution, the Bank of England. “Where music and publishing have led, finance could follow,” Andy Haldane, the Bank of England’s chief economist, has said.

Smartphone money management

Apps for banking and paying continue to grow in popularity. Barclays mobile payment service Pingit hit its millionth business transaction in January this year. Furthermore, according to the Centre for Economic and Business Research, some 20 million adults will use their mobiles to pay for goods and services by the end of the decade, according to the Centre for Economic and Business Research. At the other end of the scale, traditional bank branches have continued to close – there have been 546 announced in this year alone.[1]

Peer-to-peer lending and crowdfunding

The launch of the Innovative Finance Isa, which allows some crowdfunding and P2P investments to be held in the tax-free wrapper, puts this form of investing firmly in the spotlight – although because of delays in processing authorisation applications by the FCA, it may take longer than originally anticipated before many crowdfunding and lending platforms are actually available as ISAs.

Add to this the cut in Bank Rate and it’s clear that more people may be considering this as a way of earning income from their savings. Always check the security provided and how liquid this security is; the best platforms are clear on this and provide security on highly liquid assets – although unlike putting money in the bank it is not risk-free, so you may want to seek advice.

Global investment

Post-Brexit, the UK stock market has become a less popular place to be. The latest figures from the Investment Association[2] show that £1bn came out of UK equity funds in July – whereas global funds saw an increase in sales, suggesting that investors are looking further afield for returns.

Premium bonds

Sometimes the old ones are the best. The Government’s National Savings & Investments (NS&I) hiked the maximum amount of premium bonds that savers can hold from £40,000 to £50,000 in June 2015.

The result? A £14bn increase in premium bond investments to £61.8bn in the 12 months to March. The average return on the bonds is just 1.25pc, but with rates for bank savings at record lows, many savers are hoping to get lucky.

Glistening gold

Uncertain times encourage many to buy gold, which is seen as the ultimate safe haven. Economic events including the Brexit vote saw gold investors nearly double their money in the first seven months of 2016.[3]

Biometric security[4]

Fed up remembering all of those passwords and PIN numbers? They’re already becoming a thing of the past as banks take a more personal approach. Barclays has become the first bank in the UK to use voice- recognition software to verify identity for telephone banking, with HSBC and First Direct expected to follow.

New bank Atom is also offering facial-recognition software for customers, with RBS and NatWest allowing customers to log in to their banking apps with fingerprints.

Fixed-income funds

With the Brexit vote leading to uncertainty over the future, many are turning to fixed-income funds over equities for perceived security. The Investment Association said that corporate bonds, strategic bonds and global bonds were three of the five most popular sectors in July.

Tax-efficient lodgers

Sites such as AirBnB, which allow you to rent out rooms or your home as part of the ‘sharing economy’, have continued to grow in popularity after an increase in the Rent a Room scheme from April allowed all taxpayers to rent out a room for up to £7,500 a year free of tax.

Chatbot banking

With Facebook Messenger opened up to third parties, many banks are already trialling chatbots across the world who will communicate with you through your messaging platform. By the end of the year you might be able to pay your friends and check your balance through a chatbot on Messenger.

Negative savings rates

Are you paying to bank on the high street? Perhaps not yet, but the 2016 interest rate cut to 0.25 per cent means many of us are no longer receiving any interest on our current accounts. With Royal Bank of Scotland already charging some business customers for holding cash on deposit, the spectre of us all paying to bank is perilously close.

[1] thisismoney.co.uk
[2]theinvestmentassociation.org
[3] ft.com
[4] telegraph.co.uk/personal-banking

24th Hour Failure (To finish first, first you have to finish)

Author

Angus Dent

Date

22nd June 201620th July 2016

This weekend saw a huge disappointment in the ’24 Hours of Le Mans’ race, leaving the Toyota team questioning what happened, to watch success slip away in the last 3 minutes of this gruelling challenge, was heart-breaking for those involved and the most fascinating viewing for the interested spectator and commentator.

Ultimately, it appears that one vital element led to the subsequent defeat, and handed the victory to the consistently tried and tested model of their competitors in the Porsche team. On what was the most important day in the calendar with glory a single lap away the failure of one part of the package turned the whole effort into embarrassment and widespread press coverage for all the wrong reasons.

Great story – but what does this have to do with the P2P space…..? A lot of common themes and messages can be taken from this story

Let’s look at the top teams on the starting grid in the race……they all had roughly the same size team behind them, with what at face value appeared to be the same skill set and knowledge. All of the cars looked pretty identical from the outside, bar the different splashes of colours identifying their team allegiance so why would one fail so spectacularly at the critical moment?

The answer lies under the bonnet – look at all the components, the chassis, the aero package, the engines etc. perhaps at a glance they look the same but they are not. It’s the whole package that must be fit for purpose, if 1% isn’t then abject failure will result. That elusive, in the case of Toyota, 1%, became the difference between success and failure, being lorded in the press or blasted for a simple error of judgement and engineering.

The alternative finance sector is seen by most on the outside as one identical group of organisations, all competing under their own branded team colours for the same purpose and all on the starting grid in identical vehicles. Lift the bonnet however and you’ll see huge differences that will optimise an organisation to success, or cause them to crash out of the sector in a blaze of (non) glory.

Unlike the image of the homogenised group of lenders, grouped together in the media and by less informed bystanders under the title ‘P2P’ there are actually numerous variations of platform, offering, expert teams and niche areas all operating in this field. Each has their own reason to believe they should be first across the line, many will stumble at the first hurdle due to lack of due diligence and not robust enough offerings or platforms. Some will look like they are in it for the win, only to fall foul to that elusive 1% of information, security or expertise and simply roll across the finish line in failure place (there’s no second or third) – to the delight of the watching crowd – who want to be entertained by stories of failure.

Please visit www.archover.com to find out more about our winning proposition.

Peer to Peer Lending Regulation: the benefit for SMEs

Author

Angus Dent

Date

9th October 201517th May 2016

[avatar]

A recent article written by Dr Avinash Persaud of Intelligence Capital caught my eye this morning in which he discussed the major issue of financial regulation and the difficulties facing SMEs in trying to raise finance through the traditional lending avenues. Persaud is a well-qualified source of knowledge: a former governor of the London School of Economics, a former member of the UN Commission on Financial Reform and a visiting scholar in both the European Central Bank and the International Monetary Fund, as well as the Chairman and former employee of a range of private, public and investment banks. The article is written for an Indian digital newspaper, but it certainly is written from a global outlook. It can be found here: http://www.livemint.com/Opinion/fQpaevJ8DX7KUpwBVdeXQK/Crowd-financing-is-not-banking.html

I have identified two important points from his article. Firstly, he is at pains to highlight the importance of facilitating finance to SMEs to drive economic growth, and he recognizes that banks cannot be expected to provide all of the finance. He recognizes that “a large part of the problem of financing development is not the absence of cash but an inability to mobilize it“. In my view, this is the result of the lending vacuum left in the wake of the Basel III rulings that ensure banks must have proportionately more capital in the bank when lending to small businesses than they would lending to more established businesses, tying up more of funds than banks would like. Dr Persaud recognizes the need to “use technology to match untraditional borrowers with untraditional lenders and provide opportunities for diversification and other forms of risk and information management.” Persaud fails to recognize that the bulk of the lending can come from institutions who will pledge alongside individuals on the same terms. Dynamic, flexible and secure Peer to Peer (P2P) crowdlending platforms that are properly regulated will fill the SME lending vacuum, facilitating finance from SMEs from a range of institutions and investors whose money would otherwise be unavailable to borrowers.

This leads me to the second main point: regulation. I think Dr Persaud is right to highlight the importance of differentiating lending platforms from traditional banks, a job that the regulators must do to ensure that prospective lenders know exactly what the risks are. The P2P industry itself wants FCA regulation for clarity as much as credibility. Regulation needs to be a long, drawn-out process to avoid simply bracketing it with banking regulation. Persaud reasons that “regulating crowd financing platforms as a bank and not an exchange would not only undermine the point of it, but would create systemic risks”. However, Persaud’s belief that P2P alternative finance platforms should drop “conventional” nomenclature is not necessarily the answer. I disagree with his statement that the banking terminology “Market Place lending” shouldn’t be used by alternative finance P2P lenders because that is exactly what is on offer to SMEs wishing to borrow money and individuals willing to lend.

In the words of Dr Persaud, “moving to the next level of social and economic development depends on these borrowers getting through”, which in turn depends on regulated Peer to Peer crowdlending platforms facilitating the finance from a range of savvy individual and institutional investors.