The Anonymous Widower

Zopa: P2P Investors Outperformed The FTSE 100 In 2018

The title of this post is the same as that of this article on Peer2PeerFinance News.

The title is a good summary of the article, which is a must-read.

January 9, 2019 Posted by | Finance | , , | Leave a comment

The Concept Of Hybrid Banking

I have been writing about hybrid trains and locomotives recently.

In Hybrid Power On The Railways, I summarised the current state of development, with brief descriptions of the current hybrid trains and locomotives.

This was my conclusion.

Just as hybrid cars are becoming more numerous, I suspect we’ll be seeing more hybrid trains in the future.

So can hybrid principles be applied to other industries and processes?

A Standard Hybrid Process

In my opinion, one of the best hybrid systems is the transmission of London’s New Routemaster bus. This description of the drive-train is from Wikipedia.

The bus is a hybrid diesel-electric driven by a battery-powered electric motor, charged by a diesel fuelled generator and recovering energy during braking by regenerative braking.

It is a classic serial hybrid vehicle.

Energy is collected in the battery from the diesel generator and regenerative braking and the battery powers the bus.

Hybrid Banking

Could a bank account be designed on similar principles?

  • Money would be collected and stored in a deposit account, where it would earn interest.
  • There would be a wallet or current account, where sufficient money is available to pay bills expected.

I also believe that just as in the bus, there would be a clever control algorithm, that made sure money was in the right place.

  • To pay bills.
  • Earn maximum interest payments.
  • Avoid charges for going overdrawn.

Many would believe, I’m asking for the impossible.


Zopa Or Another Peer-To-Peer Lender As A High Interest Deposit Account

I use Zopa to store my excess cash.

I just add money, when I have spare.

Zopa’s computer decides, who I lend it to, so it’s effectively deposit-and-forget.

Since, I started investing I have earned returns of around five per cent before tax.

Any irrecoverable debts are now allowed against earnings.

But the unique property of Zopa and probably some other peer-to-peer lenders, is that each month a certain amount of money becomes available for reinvestment or withdrawal.

These figures show the percentage of money, I’ve had available in the last few months.

  • May 2018 – 7.5%
  • April 2019 – 6.0%
  • March 2019 – 5.7%
  • February 2019 – 5.6%
  • January 2019 – 6.1%
  • December 2018 – 4.7%
  • November 2018 – 6.9%
  • October 2018 – 7.1%
  • September 2018 – 6.7%
  • August 2018 – 7.5%
  • July 2018 – 6.8%

So it looks like for a mature Zopa portfolio, around 6-7 percent is available for reinvestment or withdrawal.

If like me, you have tax bills to pay at various times of the year, you might sometimes take the latter option, as I do!

But if you do withdraw money, your ratio will change.

It should also be noted that a high proportion of Zopa contracts make payments on or around the first of the month. So lenders can get a sizeable payment in the first few days of a month. All very handy!

Nationwide Or Any Other Bank Account As A Wallet

I use Nationwide as my bank current account, transferring money between Nationwide and Zopa as required.

I also have a sensible agreed overdraft limit, which gives me an extra amount of flexibility. I think it’s only been used twice in the last couple of years at tax payment time.

As the overdraft limit is lower than the minimum amount of money, I’ll be able to withdraw from Zopa in a month, I know that if I use the overdrsft, I should be able to repay it quickly.

The Control Philosophy

I don’t have a computer to work through the control philosophy, but I can use the brain I was born with.

By about the twentieth of the month, I can see the state of my finances and generally know, whether my pension will cover my expenses for the next month or so, or if I need some help.

So when the Zopa payments kick in around the turn of the month, I withdraw what I think I’ll need.

If I draw out too much, then around the twelfth or so, I put any surplus back into Zopa.

A Hybrid System

I believe that what I have described works in a similar way, as a typical hybrid drive system for a bus, train or car.

  • Zopa backs up the bank account and provides extra finance when needed. This is a similar function to the traction battery in a hybrid vehicle
  • The agreed overdraft facility is there if any extra short term finance is needed. It has a function similar to capacitors in a hybrid vehicle, where they are used to provide a fast smoothing response.

Imagine an on-line banking system, which used artificial intelligence to calculate how much extra money is needed each month and transfer money to and from Zopa accordingly.


December 25, 2018 Posted by | Finance | , , , | Leave a comment

Is Peer-To-Peer Lending Having A Spot Of Bother?

There have been one or two news reports questioning asking tis question.

I invest in Zopa and I have made the prudent decision to put my spare money in a Safeguarded product.

I have had a good run and certainly get more on my savings than I would in a bank. Obviously, I am including any bad debts in this statement.

I shall watch the situation, but I still believe what I said in Stability in Financial Systems.

If there are rumours of a spot of bother, then the following will happen.

  • Investors will put their money elsewhere.
  • Rates to lenders will rise.
  • This will tempt nvestors back in.

It’s a merry-go-round for money!

Note that because Zopa matches investors and borrowers by means of a computer, no human bias can drive the system in a wrong direction. Except a bent programmer and hoipefully systems are in place to check the honesty of their employees.

September 2, 2017 Posted by | Finance | , | Leave a comment

Peer-To-Peer Lending Is Different In The US

I like peer-to-peer lending and have quite a large sum invested. But after reading this article in the Financial Times, I’m pretty certain that if I lived in the United States, I wouldn’t touch peer-to-peer lending with a bargepole.

The reason is that in the United States, institutional investors get first pick of the borrowers and are developing software, so that the retail investors gets what’s left.

In the UK, the Peer-To-Peer Finance Association has moved to ban this practice and make all investors equal.

The day they give preference to institutions, my money will be withdrawn gradually as it becomes available.

I think we all have to remember that one of the causes of the Financial Crash of a few years ago was greedy bankers, who felt they were a class above the vast majority of people, who have made their money by sheer dint of hard work.

Whatever you do, read the article in the FT. It’s a cracker!

And also look at the Peer-To-Peer Finance Association web site!

May 23, 2015 Posted by | Finance, World | | Leave a comment

Peer-to-Peer Lending And Retirement

This article in the FT, entitled Zopa To Launch Product For Retirement Savers is a must-read for anybody who is retired or thinking about it. This the first paragraph.

The UK’s largest peer-to-peer lending service, Zopa, is developing a new investment product tailored to people beyond retirement age who will have much more flexible access to their pension savings from April.

It sounds that I’m using my Zopa funds in a similar way. There is one big difference though in that I’m doing it using the standard Zopa system, so I’m not paying anybody in the middle for commission or advice.

My use may have advantages, in that as funds comes available they can be stored away in Zopa.

January 3, 2015 Posted by | Finance | , , | Leave a comment

My Zopa Summary For 2014

I’m publishing these figures, as in my view, they are very indicative of a mature Zopa account.

Remember that I started investing in 2008, so some of the money is possibly on its third loan.

I have added to the pot over the years, when I have spare money left over at the end of the month. I’ve also repatriated money at times, when because of circumstances, I have some large bills to pay.

At the start of the year I had £147,000 invested and at the year end that had risen to £156,000.

Over the year, I’ve actually taken out £16,700 and paid in £18,500, so I haven’t really paid anything into the pot.

Interest and repayments to my holding account in Zopa has been almost £96,000, which conveniently works out at £8,000 a month. So I could bring up to this sum into my bank account for paying bills every month. As these payments usually occur around the beginning of each month, it is very easy to juggle them with my approved overdraft limit to avoid paying the wunch, excess fees I don’t need to.

Over the last year, the amount of money I’ve earned works out as a return of five percent before tax.

Because most of my money has been lent out in the last couple of years or so, I suspect that a high proportion of my Zopa money is covered by their Safeguard scheme.

The downsides are that I could earn more with more risky peer-to-peer lenders and I have to pay tax on my earnings.

I never give financial investment advice, but I have found Zopa to be the ideal mattress to put my spare money in a place, where I can access it reasonably quickly. It certainly pays a better interest rate.


January 2, 2015 Posted by | Finance | , , | Leave a comment

Peer-To-Peer Energy

This report from the UK Solar Power Portal makes some good points.

I can envisage a time, when the solar panels on my roof, feed into a system, that gets me the best price and this is delivered at a best price to those that need it.

As a control engineer, I know it’ll probably be totally automatic and the price will be a balance that is the best for micro-generators and consumers. Just as with peer-to-peer lending, the only losers will be the big companies. Except for banks, you will read energy companies.

December 18, 2014 Posted by | Finance, World | , | Leave a comment

Peer-to-Peer Lending Losses To Be Eligible For Relief

An obstacle to some, who might want to use peer-to-peer lenders to save money, is that any there was no relief for any bad debts. But George Osborne has changed all that and you can read about it in the Guardian. This is said.

And this week the industry received a major boost when George Osborne unveiled a package of measures designed to help it grow. Crucially, the chancellor announced a new bad debt relief which will allow individual investors to offset any losses.

So it seems that peer-to-peer lending is getting less risky all the time.



December 6, 2014 Posted by | Finance | , | Leave a comment

Zopa Goes With The Flow

This article on CrowdfundInsider talks of a tie-up between a boiler maker; Flow and a peer-to-peer lender; Zopa. This describes the link.

The Flow boiler will be launching in January 2015 and will be available to customers through a new finance package. This will provide a payback time of five years for the complete cost of the boiler. Customers may purchase the Flow boiler using a separate unsecured personal loan via Zopa, with repayments being off-set by reductions in your home energy bill from the value of the electricity generated.

I think we’ll see a lot of deals like this, where two new companies in different fields link up to make two and two add up to six.

This is disruptive innovation at its best.

December 2, 2014 Posted by | Finance, Transport, World | , , , , | Leave a comment

Payday Loans Get A Cap and a Kicking

This morning the Financial Conduct Authority has imposed a cap on payday lenders. The BBC report starts like this.

Payday loan rates will be capped at 0.8% of the amount borrowed a day,said the Financial Conduct Authority (FCA).

In total, no one will have to pay back more than twice what they borrowed, and there will be a £15 cap on default charges.

I do hope that this type of loan quickly becomes a blip on the history of finance.

If you might at some time need to borrow money, make sure that you can get the best credit rating you can, by behaving responsibly. This should help to give you access to finance at a reasonable rate when you need it.

But we can all help to get rid of these high cost loans.

I believe that if we put our savings in a peer-to-peer lender that lends to others, this will put more money in the hands of responsible lenders, who can lend to those that need to borrow, who fit their lending requirements.

So you’ll be helping yourself and also helping others.

But do choose a peer-to-peer lender that is or will be regulated under the FCA.

Zopa, who are regulated, say this about their relationship with the FCA

November 11, 2014 Posted by | Finance | , | Leave a comment