An Investigation Into The Stability Of Peer-To-Peer Lending Systems
For some time, I’ve thought that peer-to-peer lending systems, and Zopa which I know best, in particular, are a very interesting proposition mathematically. I did muse on this question some time ago in Stability in Financial Systems.
My education is at Liverpool University, where I got a B. Eng degree in Electronics in 1968. I had specialised in Control Engineering and my undergraduate thesis was all about mathematical modelling.
Most of my career since has been about large business, monetary and planning computing.
But one thing that must be born in mind, is that after I sold Metier in 1985, I formed a finance company in partnership with a friend. We still talk so it must be a good relationship.
In the years I had a stake in that company, I modelled the cash flows for obvious reasons of watching risk, just as I do with my funds invested in Zopa now.
The company taught me a lot about the finance industry and it was partly for that reason, that I invested my savings in Zopa nearly six years ago. And I’ve not regretted it one bit!
As I said in Stability in Financial Systems last year, I have a feeling that Zopa is a stable system. I also think they have used this stability to their own advantage, to create their Safeguard offers.
Obviously, a full investigation would be of value to see how, if Zopa my proposition concerning the system is correct.
You would just right down the various cash flows and see how the various scenarios will affect the company.
Poor Computer System Design
I just tried to make a payment through my on-line bank account. As the payee has moved their account since last time, I needed to change the sort code and account umber. But you have to delete the old entry and re-enter a new one, as there is no other way.
I finally did the transfer, but even then, there were quite a few textual bugs in the screens I saw.
This is very poor system design and is another entry in that fat book called How Not To Design A Banking System.
My Bank Has Sent Me A New Cheque Book
In the last three years, I think I’ve written two cheques and I’ve received even less than that!
So why does my bank waste money sending me a new cheque book?
After all, if it had gone missing in the post, as one or two other letters have in the past year, and had got in the hands of fraudsters, the bank would have had a big mess to sort out.
I just logged in to my bank account to see how many cheques I written in the last three years. It wouldn’t tell me, as the start date was too far in the past.
Useless!
But even then the two cheques I could find, were totally anonymous and could only be identified by going to paper accounts. Wwhich in this computerised age, I don’t have.
Totally useless!
Cheques should only be people with heritage, genes or birthplace from a country in Central Europe.
I’m very tempted to take the new cheque book and leave it on a park bench and see what happens! I would of course send a letter to my bank, saying that I don’t do cheques and would they please bounce any that are attempted to be cashed. And of course to stop wasting money by sending me new cheque books.
An Offer I Can Refuse
This morning, when I logged into my bank account, they were saying they had some special offers tailored specially for me.
Am I alone in refusing any offer from a bank? Except of course, things that are free improvements to their current service.
What they were offering me, I don’t know, as I’m so cynical about banks, I didn’t bother to read the offers.
Paid-For Bank Account Complaints Soar
It is being reported that complaints about paid-for bank accounts are soaring. It’s here in the Guardian. Here’s a flavour.
Complaints about wrongly sold, fee-paying current accounts are rising sharply according to data that suggests this could be the latest mis-selling scandal to hit the financial sector.
Nationwide have been trying to sell me a paid-for account for some time. It gives a whole series of things I don’t want like car breakdown cover and a guaranteed derisory interest rate on a small amount of money. They even tempt me with an Upgrade Now button on my on-line account. I wonder how many people have been fooled by it!
The Peer-To-Peer Invisible Firewall
I still have some money on deposit with my bank, as I need it to pay builders and things like that, but I don’t think I will have it there for much longer.
This morning, I got a load of messages trying to target my non-existent NatWest account. As I have never had a message targeting any of my peer-to-peer lending accounts, it would seem logical that any fraudster will more likely get my bank account details than say those of the peer-to-peer lenders.
But suppose they did break into my peer-to-peer accounts, they could only transfer money back to my main bank account, which was used to load the money to the accounts. So I doubt it would do them any good.
So to get any of my money out of the peer-to-peer sites, they’d probably need to take complete control of the site and replace the software with their own.
With my software hat on, I would propose that that is virtually impossible.
So in my view in addition to the obvious security on peer-to-peer sites, there is an additional invisible firewall, due to the design of the sites.
This would make them a very unlikely target for a sophisticated criminal. They would find it easier to set up a completely bogus site and get punters to deposit money with them, for onward transmission out of the country. Hopefully, that would be spotted, given the high-profile nature of sites like Zopa, Funding Circle and Ratesetter, who have been through the mill on credibility with the media, regulators and politicians.
They can’t all be wrong!
Abbey National Lives
On Wednesday, I got some money out of a cash point machine in Bethnal Green. It was a branch of Santander and it was close to a bus stop, so was convenient, as I was waiting for the bus.
This morning, four days later it appeared on my on-line bank statement fully annotated.
Cash machine wdl Abbey
According to Wikipedia, Abbey was rebranded as Santander in 2010. But obviously, they haven’t updated the computer systems.
It seems to me, that millions of crap programmers are alive and well and working for banks.
Spanish Practices
Is Santander getting rattled, as it has just launched a loan sale?
i don’t need a loan and if I did, I wouldn’t go any any Spanish bank! Especially, with all the Spanish practices at Gibraltar.
Will The Banks Actually Allow This?
It is being reported in the Telegraph, that the government is thinking about allowing peer-to-peer lenders to be funded by ISAs.
I suppose it will be very good news for those who invest in ISAs, but it will be bad news for banks, as they will be losing one of their ways of selling low-interest rubbish products to their customers. The only way, they could get a piece of the action, would be for a bank to get into bed with a peer-to-peer lender. But the likes of Zopa and their peers, probably have enough financial friends to set up a way to sell ISAs and give the banks even more of a kicking.
After all, how many of those on the Dalston omnibus would trust a banker with anything but small change.
I suspect George Osborn is going to get an enormous amount of lobbying to stop this well-thought out scheme.
Hold tight George! Our savings are dependent on you not giving in to the wunch,
Is Nationwide Being High-Handed?
On my on-line bank summary from Nationwide, there is a button saying Upgrade Now against my Current Account.
It doesn’t say any more and I suspect, it would put me on one of their pay-ten-pounds-a-month accounts, which give me a right to useless interest rates.
Surely, I demand something a bit more informative!
The Anonymous Widower 