News Briefing - Crowdfunding, SME And Alternative Finance

London's financial district, pulsing with money and technology, photographed from the air

1. UK – FinTech 

Peer-to-peer lending bosses have suggested there is an opportunity to tap into a £75.5bn ‘lockdown savings’ market. Nicola Horlick, CEO of Money&Co., is among those opining in P2P Finance News.

“Joint research by multi-asset investment platform eToro and the Centre for Economics and Business Research showed those fortunate enough to have more discretionary income during lockdown are on course to save an average of £1,434 each in the three months to June.

The restrictions on movement have meant that, despite many workers being furloughed and the financial hardships from Covid-19, a significant number of people have been able to make regular savings on travel costs and other daily expenses.

This adds up to £75.5bn of ‘lockdown savings’ in the second quarter of 2020 – more than double the previous quarterly record of £37.2bn which was set in the first quarter of 2010.

The Bank of England’s Money and Credit statistics data showed that savings increased by a record £25.6bn in May, even more than the £14.3bn rise in March and £16.7bn in April.

This compares to a pre-pandemic average of around £5bn a month.

“There’s an opportunity for P2P if people believe the natural thing would be to invest,” said David Bradley-Ward, chief executive of Ablrate.

“But it’s still too early to see if there will be a big impact, we’re still unsure of where we are in the cycle. A lot will be returning to cash until we understand where the market is.”

Daniel Rajkumar, managing director of Rebuildingsociety, said that it’s great that so many people have been resourceful during this time and he would encourage them to invest and save while the economy recovers.

The average rates for easy-access savings fell to 0.29 per cent in May, down from 0.41 per cent in April, the lowest since the Bank of England’s records began in 2016. Rajkumar pointed out that with savings accounts offering little in returns, P2P presents a good opportunity for investors.

“Not much is to be gained from savings accounts and the stock market is still up and down,” he said.

“P2P lending is a good way to earn gradual compounded returns above average, above the Bank of England’s 0.1 per cent base rate notwithstanding the risks, so I’d encourage them to look at alternative investment products.”

However, Nicola Horlick, chief executive of Money&Co, said it might not be a good idea to market to these lockdown savers because it’s difficult to find sufficient, good, safe loans for retail investors in the current climate.

“It’s not easy to find good loans that are safe so it’s not a good idea to launch a big marketing strategy at the moment for retail investors,” she said.

“It depends on market conditions. If we’re in the worst economic downturn in modern history it’s too early to tell what would happen and if there would be another lockdown.”

2. UK – FinTech

MoneyBox, an inexpensive option for saving into long-term equity funds, has closed its 95-day notice cash-deposit account. AltFi reports:

“In the rock-bottom interest rate world of Covid-19, decently paying savings accounts have become the latest casualties. 

Marcus took steps to slash rates and then withdraw its fixed saver after demand put it up against a regulatory threshold, now MoneyBox has followed suit. 

The savings app quietly removed its 95 Day Notice Savings Account last month, telling existing customers of the Investec-provided account that they would no longer be able to deposit more cash into their accounts, only withdraw. 

In an email to customers on 15 June, seen by AltFi, MoneyBox wrote that “over the last few months, we have seen large numbers of customers sign up for the 95 Day Notice Savings account.” 

“Unfortunately we have limited capacity with Investec and have therefore taken the decision to temporarily suspend deposits for existing customers and close the account to new customers.” 

Any funds currently invested in an account will continue to earn interest, which stood at 0.8% AER before the account was closed.”

 

3. UK – FinTech

The FinTech Times runs a feature interview with the CEO of challenger bank OakNorth.

“When COVID-19 first began to emerge in January 2020, the first step that OakNorth took was to look at the potential for international supply chain disruption. The European fintech unicorn developed its own “COVID Vulnerability Rating” (CVR) Framework, which integrates over 130 proprietary subsector-specific COVID-19 stress scenarios with regional overlays, incorporating assumptions for impacts on key financial metrics such as revenue, operating costs, working capital and CapEx.

The Framework enables commercial lenders to re-underwrite loans and brings consistency to their credit approach through the crisis, running risk analysis on a consistent basis, and since the start of the year, has analysed around $400bn of loans.

Rishi Khosla OBE, is the Co-founder and CEO of OakNorth. Prior to this, he co-founded Copal Amba, a financial research firm that was scaled to 3,000 employees and sold to Moody’s Corporation in 2014. He is also an early-stage investor in Paypal and Indiabulls. Known for building the fastest-growing business in Europe and one of the world’s only profitable fintech “unicorns”.”

 

4. US – FinTech

Earlier this month, US insurtech Lemonade filed for an initial public offering (IPO) and this week made its debut on the New York Stock Exchange (NYSE). AltFi reports:

“Shai Winniger, President of Lemonade, rang the bell at the NYSE yesterday evening and shortly afterwards shares in the fintech were trading at around $53, considerably higher than the $29 estimation. 

Following the initial jump, shares in the company continued upward with the highest price per share sitting at $70.80, more than double the IPO price. 

And if the jump in price wasn’t enough to highlight the popularity of Lemonade, within the first half an hour nearly 5.5m shares had been traded. 

The fintech chose to go down the IPO route in the hopes of raising at least $100m in addition to the $300m it recently raised with the help of SoftBank. 

SoftBank valued the fintech at around $2.1bn, although before the IPO Lemonade was valued at $1.6bn, current estimates put the fintech at around $3.9bn.”

 5. International – FinTech

FinExtra looks at the way forward for international payments.

“The benefits of implementing a cohesive instant payments system are manifold and well documented. As evidenced by the incoming European Single Market Infrastructure Gateway (ESMIG) and the need to integrate interoperable systems across Europe, the ability to access infrastructure that facilitates instant payments is vital.

Yet, the ongoing challenges and uncertainty due to Covid-19 means institutions are trying to find the balance between the need to innovate and evolve alongside the need to survive. Capitalising on this context is a key area explored in a recent Impact Study by Finextra Research and Volante Technologies, ‘Instant Payments: Why Covid-19 is Bringing the Roadmap Forward.’

While organisations may currently feel the need to prioritise Covid-19 contingency plans, appetite for instant payments is abundant: according to the ECB, TARGET processed over 7.9 million RTGS related payments in March 2020 alone - a daily average of 362,852 payments. TIPS itself is designed to settle more than 43 million instant payment transactions per day, up to 2,000 per second during peak times.”