Financial innovation can rescue savers

Not getting the interest on savings you’d like from your bank? Then it’s time to cut out the middleman, says David C Stevenson.

Not getting the interest on savings you'd like from your bank? Then it's time to cut outthe middleman, says David C Stevenson.

Financial repression sucks for savers. Near-zero interest rates are a conscious effort by central bankers to force savers to become investors (to take more risk) and to effect an inter-generational wealth transfer (most young people can't really afford to save but they do need to borrow).

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Row 0 - Cell 0 ZopaRateSetterFunding Circle
First loan2005September 2010August 2010
Cumulative volume lent (as of 19 May 2014)£535.6m£235.6m£278.2m
AltFi market share (last 3 months)19.9%17.9%17.15%
Number of investors50,000+12,83829,181
Number of loans made since launch80,000+37,3964,952
Current rates3yr5yrMonthly Access1yr Bond3yr Income5yrIncomeA+*ABCC-
High4.1%5.2%1.8%3.0%4.4%5.6%9.1%11.1%11.7%13.0%14.5%
Average4.0%5.0%2.4%3.5%4.6%5.8%7.2%8.4%9.4%10.6%12.5%
Low3.9%4.9%2.8%3.9%5.0%5.9%6.0%7.9%8.9%9.9%11.6%
Provision fund?Yes 'Safeguard'YesNo
Provision fund coverage (multiple of estimated bad debt)1.34x1.9xN/A
Current bad debt0.58%0.48%0.90%1.00%2.20%1.50%1.60%
Anticipated bad debt1.89%1.70%1.20%3.00%4.60%6.60%10.60%
Secondary market/mechanism to get money back early?Yes 'Rapid Return'YesYes
Secondary market fee1% plus any difference between loan rate and current market rate0.25% plus any difference between loan rate and current market rate0.25%
Lending fees1% pa (included in rates shown above)Included in lending rate1% pa
Minimum investment£10£10£20
David C. Stevenson
Contributor

David Stevenson has been writing the Financial Times Adventurous Investor column for nearly 15 years and is also a regular columnist for Citywire. He writes his own widely read Adventurous Investor SubStack newsletter at davidstevenson.substack.com

David has also had a successful career as a media entrepreneur setting up the big European fintech news and event outfit www.altfi.com as well as www.etfstream.com in the asset management space. 

Before that, he was a founding partner in the Rocket Science Group, a successful corporate comms business. 

David has also written a number of books on investing, funds, ETFs, and stock picking and is currently a non-executive director on a number of stockmarket-listed funds including Gresham House Energy Storage and the Aurora Investment Trust. 

In what remains of his spare time he is a presiding justice on the Southampton magistrates bench.