Are UK banks obstructing fintech entrepreneur’s growth by refusing them access to basic services, including bank accounts and loans? So asks an article in today’s FT.
The main concern, raised by the industry at a roundtable held at 10 Downing Street, seems to be that banks should be forced to cater for them. Slightly embarrassing, coming only weeks after George Osborne said he wanted to make the UK a “fintech hub”; complaints voiced included banks refusing to deal with companies working in the digital domains, (currencies, crowdfunding and payments).
The article explains that Treasury “is planning to hold further talks with the industry about the problems. It is essential that fintech businesses have the right environment to flourish, and the government is determined to look at any barriers to that.”
Apparently, HSBC imposed a worldwide ban in 2011 on doing business with the money services sector, including digital currencies, money transfer and remittance providers, because of anti-money laundering rules and other regulatory concerns.
However, some fintech entrepreneurs suspect banks are not co-operating because they see them as an emerging threat to their business models.
“Even businesses that do not directly handle client money have been affected and some founders reported having had their personal bank accounts closed after their applications were rejected, without explanation.”
One could almost forgive the banks for not wanting to feed then hand, and all that… it’s a bit of a technical conundrum!
Royal Bank of Scotland operates a similar policy to the HSBC ban. However, the restrictions at RBS and HSBC do not include crowdfunding companies, even though these are also considered high risk and find it hard to get bank accounts and loans.
Santander has a more fintech-friendly policy and agreed a partnership with Funding Circle to send the start-up customer leads in return for promotional work.
Innovate Finance, the industry body founded summer 2014, aims to help fintech businesses and includes paying members such as Barclays, HSBC and Visa.
Meanwhile, over the border, news comes from RBS that they are about to enter the peer-to-peer lending market, planning to pilot a platform before the end of 2014 in partnership with a third-party operator.
Will be interesting to see whether the banks also move into lending to online merchants, competing with Kabbage, (no connection), EZBob, Iwoca and Capexpand in the UK? Credit-checking from online feedback and marketplace reviews, are the high street banks going to be in a position to challenge the fast-growing sector? There certainly seems money to be made, as a quick snapshot of the current fees payable for a loan of £10,000 over 6 months shows:
2nd Capexpand repayment £1,050
3rd Kabbage repayment £1,200
4th Iwoca repayment £1,400
Not bad returns for 6 months, surely the trad lenders will be sniffing around this arena very soon, (if not already)?
This is the first project I’ve worked on with Smoke & Mirrors, which followed the brief to envisage the Fluid credit card’s latest TVC, reflecting the unique tone and attributes the card offers its customers.
Dan Andrew, (head of The Studio at Smoke & Mirrors), wanted to play on key words taken from the script such as ‘engineered’, ‘uniquely advanced’ and ‘beautifully simple’.
He and his team saw the card echoing the aspirations usually reserved for products such as Apple and Audi, creating a visual animation which showcased the Fluid card in such a way that the audience came away feeling the card is more than just a credit card, it’s a beautifully crafted product of design, a carefully thought out technological masterpiece, designed specifically for each viewer.
Everything from the sharp simplistic edges of the card to the individually moulded letters of the customer’s name would all be considered and engineered to deliver simply the best credit card on the market today. For more information on this fantastic credit-card please visit www.fluid.co.uk.
Agency Media Ingenuity
VFX/Post Smoke & Mirrors
2D Operations Dan Andrew
3D Operations Nicola Gastaldi, Jon Foskett
Colourist Dan Moran
Music Composition Scott Little
Producers Johnny Fairburn, Lydia Evitt
Exec Producer Kabir Malik
Haribo have released two ads for its Starmix sweets featuring adults talking like young children. The first spot was set in a company boardroom, the second/latest takes place in a cinema, and launched on-air in last week. They were both created by Trevor Robinson and Mary-Sue Masson. As if that wasn’t enough for the super-talented Mary-Sue, she also directed both spots, also through Quiet Storm.
The lastest, Cinema, can be viewed here:
Following on from the well-received Boardroom, which Nick Hastings, co-founder and creative director at Krow, had the following to say about in Campaign’s Private View, published 27.02.14: “The Haribo commercial is a packet-full of dopey fun. Grey-suited horrors in a boardroom become instantly likeable when they talk about their favourite Starmixes, simply because they are lip-synching to charming and totally believable kids’ voices. It’s brilliantly performed, and the director has had the good sense to keep it all beautifully understated (the actors take on the body language of kids, but so you laugh rather than cringe)…”
I recently had an email from a spokesperson at EZBOB, asking me to include them in my blog.
“Since its launch in 2012 we have helped thousands of UK businesses grow, with many of them coming back for multiple loans. We are now offering a unique solution in the UK market to all SME businesses, with easy and comfortable access to funds.
Repayments are monthly, unlike our competition, Everline which has weekly repayments. We charge less in monthly interest. Average of 3% per month, also less than our competition.”
As I’ve been interested in online lending for some time, I wondered what the annual APR could be. This response came back from the online lender:
“Thanks Kabir I really appreciate it, the APR could be as low as 19% but averages in the 30%-35% range.”
Included in the press release were the following facts:
“We have a seamless application process that can have funds delivered to the business in one hour up to £50k for a period of 12 months
We allow the customer to repay his/her loan early without penalty
Ezbob is the only financing company to have the UK government as a equity shareholder, through the Department of Business and Innovation’s Angel Co-Fund.
Ezbob is also the first and only online lender in Europe to hold the prestigious EU Financial intermediary title which allows EZBOB to extend funding to UK SMEs with EU insurance against losses. This program is run by the European Investment Fund (EIF). EIF’s central mission is to support Europe’s small and medium-sized businesses (SMEs) by helping them to access finance.The EIF guarantees loan portfolio totaled over EUR 4.7bn in 255 operations at end 2012, positioning it as a major European SME guarantees actor and a leading micro-finance guarantor.
Once an applicant registers their company with ezbob additional loans are literally one click away.
We analyze the strength of the business not just the credit score of the applicant.
To summarize, the biggest news out of ezbob is that we are now able to loan to any UK business not just online ebay/amazon merchants.”
So this got me thinking – doesn’t Lloyds currently enjoy a healthy shareholding by the UK government? And from what I’ve read they don’t appear to be lending money in any great amounts. Aha, but when they do, what interest rates do they offer money out to lucky recipients?
Apparently, a loan with Lloyds for £50k over 12 months would cost me an affordable £2,331.87 – assuming one were fortunate to granted one, of course.
Next onto Everline, I wondered what their charges would be for the same amount/period? Their website includes a loan calculator so no need to get in touch with them:
So quite a considerable difference to Lloyds. However, as the spokesperson at EZBOB claimed their loans attract lower costs than Everline, I thought I’d take a look at their calculator to see what how they promote their loans: as you can see, it gives the impression of similar loan/period costing 19.50% when it would seem to be nearing double that with most of their customers, “…the APR could be as low as 19% but averages in the 30%-35% range“.
That’s not necessarily an approach I myself would term as “fresh”…
News from the MoneySavingExpert.com blog, the cross-party Business, Innovation and Skills (BIS) Select Committee says children’s programmes are “not an acceptable place” for payday loan adverts, and adds further action is needed to protect consumers from short-term high interest lenders (see our Payday Loans guide for alternatives if you’re struggling).
MoneySavingExpert.com creator Martin Lewis warned the committee last month (watch the session on the Parliament website) that lax rules on payday loan advertising risk inuring a new generation to the dangers of these loans of last resort (see the Payday loan ads should be banned from kids’ TV MSE News story).
Labour leader Ed Miliband has also backed MoneySavingExpert.com’s campaign, warning his party would change the law to ban them if necessary (see the Miliband backs MSE’s call MSE News story).
Earlier this month, research from broadcast regulator Ofcom found children aged 4-15-years-old saw 596 million payday loan adverts in 2012 – up from three million in 2008. This meant the average child saw 70 payday loan adverts last year.
Martin says: “We’re delighted the select committee is also calling for a ban on payday loan ads on kids’ TV.
“When I gave evidence to the committee, I called on it to act as the current explosion in the number of people borrowing in this way is nothing compared to how the next generation will act.
Looks like the heat is turning up for lenders such as Wonga.com and 247Moneybox (trading name, alongside Capexand, of Active Securities). Wonga.com are now also lending to businesses, although under the guise of Everline, presumably to shake off their reputation for ripping off consumers, Capexpand, Kabbage, (no connection) and others.
It was a busy week at Funding Circle with over 70 new businesses coming onto the marketplace. Of the 73 new borrowers, the majority needed business loans for expansion and the two sectors that provided the most activity on the marketplace were within the professional and property sectors.
There were 73 new business loans listed last week and there are currently 63 auctions on the marketplace.
The total value of the new listed loans was £4,169,600; that’s an average of £57,118 per loan. The largest loan value was £150,000 and the smallest loan value was £5,000.
Business loans still available for bidding on for the next 3 days or more:
- Hair product retailer needs a £70,000 loan
- Convenience store in Wales requires a £80,000 loan
- IT staffing solution provider is looking for a £100,000 loan
- Motorcycle dealership needs a £100,000 loan
- E-learning provider requires a £100,000 loan
- Bristol pub chain is looking for a £50,000 loan
Weekly marketplace trends
These graphs show the most recent activity on the marketplace. The average gross yield graph is reported weekly and shows a rolling two week average. Number of loans, value of loans and secondary market are reported weekly. The dates on the graph should be read as ‘week beginning’, for example: 2-Dec represents the week of 2nd – 8th December.
If you need working capital to grow your business, Kabbage recommends here for an amazing online lending opportunity.
By way of example, Bramley & Gage manufacture award-winning fruit liqueurs and gin in Thornbury, Gloucestershire; in May this year they took out a business loan which was funded by 248 people across the UK.
Here’s the story of their business, and their experience, in their own words:
So if you’re looking to grow your business and need extra money, visit Funding Circle, the best way to borrow money online, at a fair cost to lenders, unlike some other online lending platforms, that impose relatively high charges for short term borrowing. For example, £10,000 borrowed over 6 months at via Funding Circle looks like this:
Therefore, it would cost 6x £1,698 = £10,188 + fee of £100 = £10,288 – £288 charges in total.
A quick comparison to some other business online lending platforms, at the same time:
IWOCA – £10,000 over 6 months, repay £11,400 – charges £1,400
EZBOB – £10,000 over 6 months, repay £11,020 – charges £1,020
Thought I’d take a look at the ‘arthouse’ film directed by Gary Tarn, (this piece is not included in his portfolio, funnily enough), for Wonga.com. For the most part I am amazed more reviews haven’t mentioned that it’s a terrible piece of filmmaking! It looks good enough, but, hmmm, where’s the story arc or narrative. I wonder, in their desperate need to not include any mention of money did Wonga and Gary actually forget to include a story? See for yourself – although, please don’t think I’ll be offended if you decide to press the stop button at any point!
If you’re interested in actually finding out the back-story of the 12 contributors, visit here, where you will see the details of each person’s successful loan application and the repayment history/charges, etc.
Interesting Wonga chose to premiere this film the evening before their appearance before a business select committee. Along with QuickQuid and MrLender, (I kid you not!), they were grilled by MPs whilst Ed Miliband gave a speech at Battersea Power Station where he said payday lenders were another example of the sort of “predatory behaviour” blighting the lives of ordinary families, signalling a wider campaign by Labour against big business in the run-up to the 2015 election.
Let’s see how well this piece of propaganda does for Wonga, in terms of turning the tide of public opinion in their favour, as well as parliament.
Market-beating, unbeatable online lending – PayPal Working Capital jumps to the front of the offerings
PayPal have surely stolen the march in the online lending sector, with a new product, PayPaul Working Capital, which allows small businesses access to finance – all within minutes of applying online!
The new offering, called PayPal Working Capital, was apparently inspired y the small businesses PayPal already serves, according to Darrell Esch, the company’s vice-president and general manager of SMB lending. PayPal surveyed 1,000 small businesses to gauge their feelings about the current lending environment.
“PayPal Working Capital enables small businesses to easily scale to meet seasonal demands, and seize new business opportunities when they arise,” wrote Esch in an online blog post for the company.
“For example, PayPal merchants can easily access funds they need to expand inventory and increase their staffs to gear up for busy times such as the fast-approaching holiday season,” he wrote.
“If you have no sales on a particular day, you owe no payments for that day,” wrote Esch, and the online payment gateway says there will be no periodic interest charges or late fees for merchants.
PayPal Working Capital is the latest addition to a crop of lenders focusing on providing small businesses with working capital quickly, but this does appear to be the one to beat:
PayPal Working Capital is exclusively for select PayPal business customers, and is based on your PayPal sales history. There is a single, fixed fee that you’ll know before you sign up. NO periodic interest charges, penalty fees or any other fees, so you know what you’ll pay, down to the penny.
Repayment is simply a share of your PayPal sales that you choose. There are no due dates. You pay only after you have sales, and payments happen automatically.
On days when you don’t make sales, you pay nothing for that day.
When your balance is paid in full, you can re-apply for another loan.
When approved small businesses apply for loans online, for a single fixed fee, which they agree to in advance of committing to the loan. The lender reviews your PayPal sales history to determine your loan amount. In most cases, your maximum loan amount is approximately 8% of the sales your business processed through PayPal in the past 12 months.
A range from 10% to PayPal / 90% to the small business, to a split of 30/70 – with low charges of 11.84% to a super low 3.5% if 30% of each day’s sales is repaid against the loan! The loan is repaid only if revenue is received on a particular day, and the share to PayPal is fixed – no minimum monthly payments, and if not money comes in, none goes out to the lender.
Compare that rate to those offered by organisations such as current UK online lenders, such as capexpand, ezbob, iwoca or Kabbage (no connection).