Tag: p2p

Governor of the Bank of England Predicts Revolution

Author
Angus Dent
Date

Catching up on London FinTech PodCast 54 I was pointed to a speech by Mark Carney, Governor of the Bank of England that for horrible reasons, the murder of Jo Cox MP, was not made. It’s a pity the speech wasn’t made as it makes some good points about FinTech, the relationship between FinTech and banking and banking more generally.

Mark Carney

The point is made that it is technology or more specifically the increasingly ubiquitous access to technology that is driving the democratising effect of FinTech. At the end of last year there were circa 2Bn smartphones worldwide. Rather than accepting that this is a process simply to be welcomed Carney goes on to say that FinTech will help in four specific areas;

“For the financial sector, these could offer shorter, speedier transaction chains; greater capital efficiency; and stronger operational resilience. For consumers, they could mean more choice; better-targeted services; and keener pricing. For everyone, FinTech may deliver a more inclusive financial system, domestically and globally; with people better connected, more informed and increasingly empowered.”

Nothing too earth shattering in the above summary, he goes on to predict revolution;

“These benefits spring from FinTech’s potential to deliver a great unbundling of banking into its core functions of settling payments, performing maturity transformation, sharing risk and allocating capital. This would mean revolution, fundamentally re-shaping the financial system.“

Heady stuff from a central banker……and apparently a revolution he wishes to encourage and for the bank of England to be a part of, albeit he expects the effects of the revolution to take many years to work through.

 

 

ArchOver and GapCap form strategic alliance to extend market reach

Author
Alex Taylor
Date
ArchOver and GapCap, which both specialise in providing loans to SMEs secured against invoices, have signed a formal Service Level Agreement which will enable them to cross-refer and share future business opportunities. ArchOver secures its loans against whole books of borrower companies’ Accounts Receivable (debtor invoices) whereas GapCap provides loans secured against selected individual invoices.
The intention is either to refer business where one or other platform is most appropriate to the particular circumstances, or to combine to provide borrowers with a double layer of finance: ArchOver to provide fixed term loans for basic working capital and GapCap to offer top up facilities to meet the cyclical needs of the same business.
Commenting on the agreement, Angus Dent, CEO of ArchOver, said: “Both organisations work in the same sector, but from different ends of the business spectrum. We often come across situations where we are either not in a position to help or are perhaps not the right people. The arrangement with GapCap means that, in some instances, we won’t need to turn the borrower away, but to send them along to GapCap who might be able to provide the help required.”
“In certain situations we will be able to lend alongside each other to provide borrowers with a real Alternative Finance solution that they would be unlikely to get from any bank.”
Alex Fenton, the founder and CEO of GapCap, said: “We are both operating independently in a busy and competitive sector and that situation will remain. However, this sensible collaboration can benefit UK SMEs trying to find the right funding solution to suit their particular circumstances.”
“On a broader scale, we see the collaboration between two finance sector disrupters as something of a ‘first’ in the Altfi industry. It’s not something the banks do, either, but ultimately this has to be to the benefit of smaller businesses looking to find flexible solutions to their financial problems. ”
ArchOver offers crowdlenders the opportunity to invest across its platform for secured returns of up to 8% per annum; it has raised over £17m for SME borrowers since it began operations in September, 2014. The Accounts Receivable, over which a first charge is taken and registered at Companies House, are protected against default by credit insurance provided by Coface, one of the largest credit insurers in the world.
Since inception in June 2014, GapCap, whose finance is provided by specialist funds including Advance Global Capital (AGC), is growing fast. The company, which provides borrowers with finance for up to 85% of invoice value within 24-48 hours, has helped clients of all sizes with annual turnover figures ranging from £80,000 to £17m.

The Sharing Economy – Driven by Peer Review and Trust

Author
Angus Dent
Date

A couple of weeks ago, while most of us were distracted, PWC posted ‘The Sharing Economy’ report. The main point taken from the sharing economy piece would be ‘never settle for stable’. The sharing economy explains that businesses cannot be taken for granted in a fast-changing world, todays changes can be changed again by tomorrow and so businesses cannot stand still. To maximise, companies must embrace change and continuously develop in order to maximise consumer benefit and competitive advantage.

The key points I’d take from the Sharing Economy piece:

–          Peer review is far and away the main driver of trust, 92% said they valued peer review above all other forms of marketing and advertising.

–          Without trust services aren’t used much, 89% said that ‘trust’ was a major factor.

–          A mind shift has begun in business from offering a product, an item, and hoping it will sell to building relationships and providing service and thereby creating a greater perceived value.

–          Embrace change/disruption in industry. We should always be looking for new ways, never standing still. Always be thinking about your competitors and how they may be changing.

sharing economy

The suggestion of the report is that only companies willing to rise to the challenges and expand are ‘poised to survive – and the potential ahead will be constrained only by the imagination of decision makers’. As companies utilise the sharing economy and create partnerships and collaboration they will find more ways to profit and aid their businesses – while helping the community and its industry sector to grow and sustain success.

Of course there’s nothing new in suggesting that only those who adapt will survive, Charles Darwin being the master of this theory – “It is not the strongest or the most intelligent who will survive but those who can best manage change.”

The crowdlending sector was born from an inability of the banks (and other providers of finance, banks becoming the collective noun for a failing sector) to adapt to changed circumstances, their failure was dramatic, public and adversely affected all of us. The lesson is clear we must keep adapting not to go the way of the banks that may yet follow the dodo.

Was it acceptable in the 80’s?

Author
Angus Dent
Date

So the results are in, we have stood up as a nation to be counted and the surprise result is that rose tinted nostalgia seems to have taken us in a direction none expected – back to the golden era of the 80’s. There’s the funny side of course, big hair, even bigger shoulder pads and at the end of the decade enormous mobile phones. Of course it’s the bleaker side that’s worrisome; British soldiers on the streets of the UK, 3m+ unemployed, a surrogate civil war with the miners……That’s said, the effect that had on asset prices was only beneficial to the humble man on the street  and you could get married, buy a house and an Aston Martin, as a poorly paid Chartered Accountant ( I know I did ). Pity about all that equity that might go to waste and for those who came along later and paid higher prices.

 

brexit flags

 

What we didn’t have in the 1980s, or at anytime until this decade and really only the last couple of years in anything approaching a measurable volume was an AltFi sector. A real alternative provider of finance that may just keep the economy going through this particular period of uncertainty and beyond.

 

Substantially AltFi was born of the last financial crisis; a hunger for yield from those with cash and a need / want to borrow from people and businesses. Some of us saw this opportunity and established businesses that arch over from the lenders to the borrowers. The problem is that the sector while growing very quickly in macro economic terms remains small when compared with the banks. Mind you much micro economic theory, some of it written and tried in the 1980s, suggests that the biggest effect can be had on the margin, deploying relatively small amounts of money.

 

What might this mean; the banks continue to carry the base load in value terms and AltFi provides finance alongside. The banks continue to lend to the larger corporates and AltFi takes more of the personal lending and the lending to small and medium sized enterprises. This of course is what has been happening over the last seven or eight years. I expect that our sector, the AltFi sector has just received a boost. Crisis makes us all more cautious, makes us retreat to where we feel most comfortable. For the banks that’s corporate lending for AltFi its SMEs and personal lending. So we’ll both be playing to our strengths, working in the areas we know like and understand.

 

One other thing makes me more optimistic; increasingly AltFi and the banks are working together. We’ve moved from a position of say three years ago, when we, metaphorically, spat at each other to one today where we’ve realised that we provide different services and should therefore work together. Working together we’ll get the UK economy through this crisis, maybe without it even becoming a crisis, and forge a larger more robust AltFi sector in the process.