Have Nationwide Lost The Plot?
I’ve just logged in to my Nationwide bank account and they gave me a soft Internet sell on their ISAs.
They were offering a guaranteed pittance of 2.5%
I get a guaranteed rate of 5%, admittedly before tax, with Zopa.
We live in interesting times!
Zopa Goes Automatic
Zopa has introduced a product called Safeguard. Read what Which says about it here. Here’s the first paragraph.
Zopa, the UK’s leading peer-to-peer (P2P) site, has today announced it has created a ‘safeguard’ to pay out to lenders even if a borrower defaults on the money owed.
Having just put some money into the new product, it would appear that the process is now totally add money and accumulate the interest.
The most interesting thing about this product, is why if an independent company can give a rate of return of 5% or so, why can’t the banks?
Go figure!
Peer-To-Peer Lending On The Up
This article from the Independent is a good summary of the state of the peer-to-peer lending market at the present time. This is the first couple of paragraphs.
Many people were sceptical about peer-to-peer lending and questioned whether it would ever take off in the UK, but with savings rates from banks and building societies suddenly hitting rock bottom this new sector is becoming increasingly popular.
With traditional savings rates having fallen by more than a third in the last six months, returns on offer from the peer-to-peer providers are looking even more attractive.
Compared with mainstream banking, this new breed of finance is still in its formative years, with Zopa launching as the UK’s first peer-to-peer marketplace in 2005.
But read it all, as there is some very useful information.
I suppose savers’ biggest question, is would you lend your money in an industry, that is just eight years old?
I’ve been on board Zopa, for around five years and can say it has been an enjoyable and profitable ride for myself.
The ISA Rip-Off
It’s the cash ISA time of the year and I’ve just been looking at the rates. As to what an ISA is, it’s probably best summed up by this page in Money Saving Expert. Here’s the first paragraph.
A cash ISA is just a tax-free savings account. You don’t need to lock the cash away, many are easy-access. Each tax year EVERY person over 16 in the UK can put a new £5,640 in these accounts that pay up to 2.8%. And once in there, the money stays tax-free, year after year.
The rates are derisory and are very poor compared to what I get from Zopa.
Admittedly, there are tax advantages, but why can’t I get those with a peer-to-peer lender if I agree to lock my money away for several years?
Crowd Funding For Research
I sometimes get involved in helping research projects at Liverpool University and I will also lob small amounts of funding towards projects I think are worthwhile.
I also look into innovative ways of raising funding for individuals and businesses, like Zopa and Funding Circle. I also loan money to the Developing World using Kiva.
So can their methods be used to raise funding for research projects.
Let’s take a researcher interested in how patients manage with the gluten-free diet, they need for coeliac disease. They perhaps want to interview as many patients as possible and produce a report that highlights both the problems and the successes, possibly on a regional basis.
So they have two needs.
A small amount of money is probably required, the size of which would depend on the size and scape of the project.
The second thing, that many projects, like the mythical one I outlined, often need subjects for the research.
Surely, a properly designed system could do both.
Similar things have been done under the general heading of crowd funding. There’s more here on Wikipedia.
How would such a system work? I would steal some of the methodology from sites like Zopa and Kiva.
The on-line system would be uploaded with suitable research projects, which borrowing from Zopa’s methods, would be checked as to the veracity of the researcher.
Prospective funders and participants would join and then search for projects, they might like to support, just like you search for suitable borrowers on Kiva.
Obviously, you could also rate researchers, just as you rate buyers and sellers on eBay.
There are some obvious winners, if this could be made to work!
I know from those in Universities, I’ve talked with, that getting funding for small projects is difficult and a lot of time and money is wasted.
Are there going to be any losers? Not directly, but I suspect some charities and their inefficient structures might be by-passed.
I will probably not develop the system, but someone will! On the other hand, if anybody wants to, I’ll be happy to advise.
Zopa Do Shorter Term Loans
Zopa’s minimum loan term has generally been three years, since I have used their web site to save and invest money.
They’ve just announced that they are now going to give shorter term loans of twelve months.
I’m not sure how this will work out for lenders, but it might attract those borrowers with good credit limits, who need tiding over. It might also attract a borrower, who has never used the system and only needs a small sum for a short time and is just trying it to see if borrowing from Zopa is for them.
I wonder if Zopa are going to allow shorter term loans to be effectively rolled on. I suppose the simplest thing to do, would be to pay off the first loan and then start another. But that would be two administration fees.
The Star That Is ARM
I am linking to this article, which has the full speech of ARM’s CEO’s statement giving the Q4 2012 Financial Results. It is a full nine pages long, so it won’t be an easy read. This statement from the first page is very telling.
So let’s start off with the highlights for Q4. Well, Q4 was a fantastic finish to 2012. We saw our continued momentum in licensing and sold 36 licenses in the last quarter. That’s another year of over 100 licenses in the full year.
As someone, who used to put his own intellectual property on someone else’s hardware designs, this number of licences is a significant number, as obviously, the more licences the company signs, the more money it will earn.
I don’t know anything about the technicalities of what ARM does, but judging by the company’s success, it must be pretty damn good. But to me, just as it was for Metier Management Systems with Artemis, when we owned the company, the managers have got the marketing and revenue model right.
In fact, I might argue, that getting that right is more important than getting the product to a hundred percent of your design aims. As obviously, if you are generating lots of money, it is easier to close that last gap in your designs.
So often, I’ve seen wonderful ideas fail, because their revenue model wasn’t designed well enough and doesn’t feed itself back strong enough into product development.
There is another thing that ARM and Metier had in common. ARM is and Metier was considered a almost a crusade or political movement by those that started the companies and those that worked there. The companies that I’ve dealt with or know of, that have had that zeal are hard to come by. My short list would include Apple, Dyson, Rolls-Royce and Zopa. Although, there are one or two architectural or construction companies, that in a few years time, might join them. And don’t underestimate other companies in all sorts of high-tech fields, using an ARM-style of cash-flow model, based on a group of individuals having a unique idea and the determination to see it through.
I can also think of several companies that had everything and then blew it! You could say we did that with Metier by selling out and a lot of other high-tech companies have done the same. And then there’s some that have just lost their way like IBM and Automony.
Tips For New Zopa Users
When you start using Zopa, you’re obviously going to go down a few blind alleys or do things wrong.
Here’s a few tips.
I always keep a record of the interest rates I have set and how much money, I lend out on particular days. Thus, if I find that money is sticking and not being lent, I can drop my rates slightly to see the effect. Zopa’s information helps in this way, but your own records are invaluable. I keep my records in Excel, but there is nothing wrong with an old-fashioned notebook or as my mate, Brian, would say, the back of an old envelope or fag packet. But then he was a real accountant!
I’d also check the minimum amount you are prepared to lend to each borrower. My limit is £100 and I’ve generally found that to be good and fairly safe.
I also don’t have AutoLend switched on. I just transfer the money to the offer, when it comes in. I have in the past found that sometimes having a few hundred pounds in Zopa is faster to get into my bill paying account, than waiting for my pension to come in. With money, timing is everything!
Make sure you have Rapid Return switched on, so that you can accept loans, that other lenders want to cash in. I’ve got seventy loans that way and not one has gone belly up on me. You may not pick up many loans that way, but they’ll generally be good ones.
Delay In Getting Funds Into Zopa
On Monday, I initiated a transfer of £2000 into Zopa from my bank account.
It arrived today, so it took three days, all because that is the speed of our banking system.
Surely, they can do better, after all the pain they’ve put the world through over the last few years.
But then they wouldn’t be able to lend that money overnight at good rates!
Are Zopa Rates Dropping?
I have been looking at my Zopa spreadsheet and it would appear that the lending rates now, are not as high as they were.
If I look at the average rate on all loans so far in January 2013 it’s 6.33%. In January of 2012, 2011 and 2010, the rates were respectively 6.27%, 6.90% and 7.43%. As I’ve been using the same lending philosophy for a few years, it would appear that rates have fallen.
Bad debt at the end of 2010 was £334.53, with 2011 and 2012 being £408.24 and £466.23.
So rates may be dropping, but bad debts seem to be well under control.
I have wondered if that money from the government and new borrowers will depress rates, but as the ratio of money available to money required seems to vary quite a lot, it is probably classic supply and demand.
I shall watch this variability with interest.
The Anonymous Widower 