10th May 2016
Recently, questions have been asked about the way the government and regulators have brought the new Innovative Finance ISA (IF ISA) to market. We think differently.
With any new product it is wise not to have an overly aggressive launch, which, as we’ve seen, can ruffle some feathers. By launching the IF ISA with only the few properly regulated platforms, rather than the entire P2P market, the launch can be more effectively controlled by government and regulators.
Another advantage of launching the IF ISA with newer platforms is to allow these potentially challenging and more innovative platforms to offer more competition and choice in the marketplace. Failure to do this could result in a monopoly, similar to the one operated so dangerously by the large banks prior to the financial crisis.
It must be considered that implementing business procedures to manage the IF ISA across the entire sector and government departments will be no easy feat. The current approach will give businesses and government departments time to build the required processes without being overwhelmed with huge volumes and thus ensuring a smoother transformation of the ISA market. As this is an opportunity of up to £400bn in potential investment funds, care must be taken in order to make sure that this development is not wasted and that investor funds are safeguarded.
One particularly onerous task with the roll out of the IFISA is that all IF ISAs across every platform must be reported to HMRC; this can only be achieved when post-launch volumes and nuances have been identified. Putting this in place requires a clearly thought through, properly defined strategy so as not to disrupt legacy reporting processes for other cash or stocks and shares ISAs. We are confident the government and regulators are working towards this plan.
Giving newer players a boost will increase competition, which will accelerate innovation and the service provided for the consumer. This is the primary motivation for developing these new products in the first place. Our first-to-market IFISA app is a great example of this.
Crowd2Fund is one of the few crowdfunding platforms which is directly FCA regulated and is the only platform offering both debt and equity investment types. Whilst gaining full FCA certification was a lengthy process, it has helped us offer our customers a best-in-class service.
We believe it is taking time for the older platforms to become regulated due to the enormous operational and technical shift required to build a robust platform that is compliant with the strict FCA standards ,which are notably higher than the previous obligations of P2P platforms.
If platforms continue to steam ahead without these processes in place, the financial services sector will be vulnerable to even greater risk, possibly compromising the security and credibility of the UK economy at large, as well as the FinTech industry.
At Crowd2Fund we’re thrilled to be offering our IF ISA at a generous 8.7% APR return* and help ambitious, innovative British businesses grow at the same time. We will continue on our path of slow, steady, sustainable growth whilst continuing our aim to offer consumers the best product and service in the marketplace.
*APR quoted is before fees and bad debt
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