The new ISA season for investors and your spring industry news
Discussing the emergence of the Innovative Finance ISA (IFISA), the Telegraph describes how the industry has been able to offer far higher interest rates than the banks. Launched in 2016, there is now a wide variety of IFISA providers lending to different types of borrowers. “After the financial crisis this new type of lending took off as savers lost faith in banks amid plummeting returns on savings accounts.” With the range of products now available, IFISA numbers are expected to swell rapidly this year.
Looking in more detail at how to use lending platforms, Moneywise discuss the benefits of diversification. “P2P platforms operate differently, so check whether you are lending to one individual or business, or your money is being distributed between a number of borrowers.” At Funding Circle, our lending tool will spread your funds across a variety of businesses to help you build a diversified portfolio.
As well as earning for your future, your lending is helping the country to thrive. A recent report by Oxford Economics showed that, thanks to your lending, businesses created and sustained 45,000 UK jobs in 2017 and contributed £2.4 billion to the economy. John Glen, Economic Secretary to the Treasury, said it showed that the rise of “peer-to-peer lending has brought about real benefits, not only for the businesses of Britain but, as this report shows, our economy, too”. Having founded Funding Circle in 2010 to help small businesses, CEO Samir Desai tells Bloomberg how rewarding it is to see the impact it’s having on the UK economy.
Another exciting development was the announcement that Funding Circle is on the shortlist for Nesta’s Open Up Challenge. Backed by the Competition and Markets Authority (CMA), the 12 finalists are looking to create innovative new products to improve financial services for small and medium sized businesses. City A.M. describes how each finalist will receive a grant of £100,000 to work on their ventures, plus early access to open banking data.
As well as leading the way on financial innovations, the UK has been crowned the tech unicorn capital of Europe. A unicorn is any private company with a valuation of £1 billion or more. The news is not only good for growing companies looking to hire the best talent, but also for consumers who have been able to benefit from these exciting new products. From the takeaway app Deliveroo to challenger bank Revolut, consumers are enjoying a wealth of new possibilities thanks to innovative UK companies.
The growth of such innovative tech businesses changing the shape of financial services. In response, several banks such as Natwest, ING and Santander have launched or announced their own digital offshoots. Known as ‘flanker brands’ they have received criticism from some for trying to hide their parent company under a new brand. Samir Desai, however, disagrees, and believes it could actually be a good thing for fintech – “I don’t think [they are] morally dubious. I think banks have in the past had lots of different brands” he said. “In many ways, it’s a good thing. It expands the market and it brings more borrowers online and we’re very comfortable competing for borrowers online.”
While the banks look to respond, businesses are already reaping the benefits of the new opportunities tech has brought. Pirates Grog Rum describe how they have grown 100% year on year after switching from bank loans to Funding Circle. In contrast to the hassle and paperwork of applying through banks, business owner Beth Jones much preferred our quick, straightforward process “Funding Circle was so much easier and gave us what we needed, all online. In fact, we arranged the latest loan while on holiday in India. It’s a great relief to know it’s there to ease cash flow when we need to restock at busy times.”
Looking at more success stories, The Times interviewed Bobbin Bicycles, who have shown the path to success for British exporters in a post-Brexit world. They got support from the Department of Trade, who gave valuable advice and helped fund trips to overseas trade fairs. Combined with extra finance and a lively Instagram account, their business has gone from strength to strength. “It’s amazing how people find us from around the world,” said Cofounder Sian. “A lot of it comes through social media. Someone sees a picture online and the next thing you know we are selling bikes in Uruguay.”
Finally, as well as having an external impact, we’ve also made some exciting internal changes. In May we announced our new board member Cath Keers. A former O2 executive, Cath is an experienced executive in the technology, retail and logistics industries. “Funding Circle is changing how the world’s small businesses access finance, and the impact it’s had on the economy and job creation over the past eight years is inspiring. I share the team’s commitment to delivering the best results for customers. The company’s high levels of repeat business demonstrate that both investors and borrowers also recognise this passion.”
Remember, by lending to businesses your investment can go down as well as up and your capital is at risk.