Katie’s crowdlending journey: Can current savings rates beat inflation?

penny jar

In October 2012 inflation, as measured by the CPI (Consumer Prices Index) index, rose from 2.2% to 2.7%. The increase was not anticipated by many and has therefore caused a mild kerfuffle, if you will, in financial circles, let alone to your average ordinary FundingKnight blog subscriber reading this now…

The reason behind the mild horror that has ensued as a result of the CPI announcement is due to the financial repercussions of said increased inflation on the economic health of UK savers.

So, for example if you, YES YOU, are a basic UK taxpayer, contributing 20% of your earnings to the lovely HMRC, you will now need to find a savings account that offers an interest rate of 3.37% (according to moneyfacts.co.uk) which, in this day and age of pretty pathetic savings options available on the high street, is nigh on impossible.

Well, I lie, it’s not wholly impossible but still fairly hard to achieve. Research offers the following statistics: 52 out of 2532 banks would be able to offer basic UK taxpayers an inflation beating savings account. That’s 2.1% of everything out there folk (State Bank of India anyone?) and that sounds to me like a fairly sad state of affairs for people looking for a sound return on their hard-earned cash stash.

Equally, if you are a higher rate taxpayer, lining the pockets of the taxman with 40% of your salary, then you would need to seek out a savings account that paid out nearly a whopping 4.5% interest rate in order to beat that darn inflation index and this is, in fact, actually impossible. At this time, as I type, there are no non-ISA accounts in existence that offer these rates.

A proper UK based savings sob story no? Well yes it really is, so here’s one final sum of misery from The Daily Telegraph money pages to send you on your way and then lets all go on a spending spree:

“The impact of inflation on savings means that £10,000 invested five years ago, allowing for average interest and tax at 20pc, would have the spending power of just £8,899 today.”

Food for thought, for sure. I would love to hear your comments, suggestions or top tips.

FundingKnight Likes… The Financial Fairytales

front cover of 'The last gold coin' book

In our recent post, Could a child fund your next business loan? we were pleased to be able to include a comment from Daniel Britton of The Financial Fairytales, a company who hold financial responsibility for children very close to their hearts. We’ve invited Daniel to tell us more about his quest to raise the levels of financial literacy amongst children and hope to welcome him to the FundingKnight blog for a guest blog or two in the new year, but, in the meantime, we thought it was time for The Financial Fairytales to feature in our ongoing series of  ‘FundingKnight Likes’ blogs.

The Financial Fairytales are a company based in the United Kingdom founded by British author and entrepreneur, Daniel Britton. The company produce books for children and schools all around the world in order to educate, empower and inspire their young readers to become financially literate, learn about the key elements of the world of money; spending, saving, borrowing plus, not forgetting the basic principles of what money actually is and why we have it.

As we all know and experience the influence money has on every aspect of our daily lives, it makes complete sense to educate children from a young age and hopefully instilling a conscientious approach to spending. In fact there’s no doubt that there are many adults out there who would benefit similarly from simple educational techniques related to their finance and savings.

Founder Daniel Britton says:

“By teaching your children about money you take charge of their future financial and economic wellbeing.  Recent studies have shown that over 2/3rds of parents believe that children aged 7 or younger should be taught the financial and money principles contained in The Financial Fairy Tales.

Lessons in financial awareness or resources which support financial literacy for kids are sadly lacking from the curriculum in many schools.”

By providing a foundation education in economics for primary school aged children, The Financial Fairytales maintain that it will help prevent cycles of bad habits potentially instilled into children by their parents. Having come through the worst financial crisis of all time in very recent years surely that can only be a good thing?

Others argue that perhaps we should let children be children and leave their childhood to less adult endeavours, but you know when learning about something serious is as fun and easy to digest as Britton’s books, you are onto a good thing.

Find out more about The Financial Fairytales books and recommendations here.

A Crowdlending Journey Begins…

Allow myself to introduce myself… my name is Katie Kennedy and I live on planet ignorant. There. I’ve said it and it feels good, thanks for listening.

Now just to get this straight, I don’t inhabit said world of ignorance all the time, it does however certainly apply when it comes to talking about the world of economics, business and investment. It would be true to say I have extensive knowledge of certain, extremely useful things. For example; I like to think I could sing you almost all of Belle & Sebastian’s back catalogue and equally you could test me on reciting large chunks of 1980s John Cusack movies word for word (go on, try me…) So yes, like I said, all useful stuff.

And yet surprisingly, the world of finance, investments, peer-to-peer lending, crowdlending, crowdfunding, kickstarting, starting-up, peer-to-crowd kicklending (and any other terms you may wish to insert here) still eludes me and I am fiercely illiterate in this language. I have no background, experience or helpfully stashed away knowledge to conveniently mine. I know little about what FundingKnight does or certainly could do. I am, you may say, an idiot in the land that you reside, the land I like to call Moneyland.

So while I may be an outsider in your lavishly funded Moneyland, I feel as thought it’s my responsibility, nay, my duty to endeavor to break down knowledge barriers, decipher jargon and become curious about financial practices. Systems that in fact would be incredibly useful to know and become acquainted with to lots of ordinary non-money minded folk who, by all accounts, can benefit hugely from what FundingKnight does and could, potentially, do for them.

I therefore agree to take on the weighty mantle of the economically ignorant and aim to translate what FundingKnight does, what they invest in and whom they lend to.

So please, join me on my crowdlending journey and as I learn a bit more, it’ll hopefully help answer some questions that us newbies need to understand and could actually benefit from. And in return for your esteemed company, I promise wholeheartedly not to sing.

Peer to peer lending: Evolution and devolution

campaign banner with slogan 'of the people, by the people, for the people'

It’s tempting to think about Peer to Peer Lending (P2P Lending) purely in terms of progress, as an evolution towards a new way of lending and borrowing money; but, whilst there are plenty of reasons to think of P2P Lending as the future of savings and investments, it’s not all about looking forward…  Sometimes, it’s just as important to learn from the past.

Banking grew out of personal relationships.  Even relatively recently you could walk into a high street branch of your bank and talk to a bank manager who knew you and your situation… and who had the power to make a decision, there and then.

Yes, there were national and multi-national banking chains but despite their size, a personal connection remained between a bank manager and their clients.

Roll forward a few years and the internet has come along and changed everything.

Why the internet?

Well, because it was the web that ushered in a new era of competition in banking.  Overseas banks – like ING, Icesave or ICICIC – plus everyone from supermarkets to department stores rushed to woo customers with great online deals.

Savings rates rocketed, whilst mortgage rates fell and the introductory rates were good for everyone… until they weren’t.

Having decided to compete for rate grabbing online customers, the banks were under pressure to cut costs to avoid hurting their profits.

Again, the web stepped in to help.  Faced with the huge infrastructure of branch networks and an urgent need to save money, banks saw the internet as a way to scale back customer service and introduce customers to lower cost, remote ways of doing business.

That, too, worked really well.  Until it didn’t.

Suddenly, customers weren’t so much connected to a brand as making temporary use of a headline grabbing interest rate and instead of using the web to get closer to customers, banks had used it to create a gulf.  The clients, whose relationships they valued no longer had a way to chat or engage with them, even picking up the phone often meant speaking to an offshore call centre.

Peer to peer lending is online too – but instead of a service that’s remote and aloof, we want to use the social web to create a community of lenders and borrowers.  We love the efficient, 24/7 feel of doing business online but we know we need to listen to and engage with our community, too.

We think P2P Lending can help rewind the clock to a time when local communities helped themselves.  P2P Lending can be large scale if you want to invest nationally, or it can become hyper-local for lenders who want to invest in businesses within their own communities.

As the concept spreads, the amount of loan opportunities will grow and there will be more and more choice about where – and who – to invest in.

That power to control your investment is our way of giving power back to customers.  Whilst P2P Lending offers a great return on your money in comparison to high street deposit accounts, we are being careful to create long-term, sustainable lending communities that create deals that offer better value for everyone.  We’ve used to the web upfront to save on infrastructure costs so our great rates really are great, and they don’t force us to compromise on service as a result.

As a FundingKnight Lender you benefit from making your money work harder and get more say in the business investments that are right for you.  Meanhile, borrowers are assessed as real people, rather than treated as data to be plug into a computerised scorecard.  We like to think it’s combining the best of both worlds – the efficiency of the social web with traditional relationships banking.

So, yes, P2P Lending is progress, but it’s about devolving power back to you, the customer, as well.

We’ll use the web to get closer to our customers and we’ll use social networking to listen to what you want.  It’s early days here at FundingKnight but we hope you’ll head over to our website and sign up to stay in touch and please do let us know what you think; we’d love to hear what you’ve got to say.

Or, if you are a well established British business looking for a fast, flexible and competitive loan, apply for business funding today, we’ve got funds ready to lend.

Photo used under Creative Commons License

The future of savings and investments

scientists and test tubes

We’d all love to have a crystal ball; Be able to gaze into the future and see clearly what lies ahead.

Increasingly, though, it’s hard enough to keep up with the pace of change, let alone predict the future.

In his new book, How to Thrive in the Digital Age, Tom Chatfield suggests that:

“The impossible facts of our age are only just beginning….  The pace of these changes is another unprecedented thing.  Television and radio have been with us for over a century; print for more than 500 years.  Yet in just two decades, we have moved from the public opening-up of the internet to its connection to more than two billion people; and it has been just three decades between the launch of the first commercial cellular-phone system and the connection of more than five billion active accounts.”

This radical change in the way we live has caused massive upheaval.  The record industry has found itself competing with instantly downloadable tracks that have made the CD single virtually obsolete.  Books are quickly morphing into ‘virtual’ e-books whilst amazon dominates the sector and everything from groceries to cars can be ordered online and delivered at the touch of a button.

In short, the way we use technology has changed not only the products we use, it’s changed us as well.

Some call it being ‘wired for distraction’; others point to the ‘always connected’ society and worry about the impact on attention spans and personal relationships.  Whatever your view, it’s clear that we’ve become more short-termist in our thinking and more demanding when it comes to products and the choices we’ve made.

So, really it’s no surprise that they way products are designed and sold has changed too, is it?

Or has it?  What’s really surprising is that when it comes to the financial sector not that much has actually changed at all.  Yes, you can now get your bank balance via text or use the internet to check interest rates but those changes are just channels, different ways of finding out the same answer – which is that financial products are no longer meeting the needs of real people.

In a recent study by Weber Shandwick, 50% of respondents agreed with the statement that “many financial products currently available don’t fit their lifestyle or their individual need.”  Nearly four in five agreed that low interest rates make savings accounts a poor investment.

So, what needs to change?

Well, Weber Shandwick suggests the industry must “start from scratch with a completely new suite of products that will meet the needs of the short-termists.”

In fact, it’s not that easy.  Meeting the needs of today’s consumers means offering fast, flexible and transparent business loans that will help the economy grow – yet banks have to focus on rebuilding their capital bases.

Meeting the needs of today’s savers means offering higher returns, yet banks are struggling to return to profitability and money is scarce.

So whilst we do need to take a new look at what is the best investment and start offering savings and investments that yield a decent return rather than typical deposit accounts that pay barely more than inflation, it may not be the banks that are able to do it.

Meeting the needs of today’s society means giving some thought to collaboration; Providing ways for people to help each other out; Finding products that are good for all concerned rather than a winner takes all, zero sum game.

It’s hard to see how banks can deliver this change singlehandedly.  In reality, private sources of business funding, and peer to peer lenders like Funding Knight who can offer both competitive loans for business and higher interest savings accounts must step in to help solve the problem.

At FundingKnight we’re excited because we think it’s not just technology that’s changing, but the whole way we do business.  We think the days of ‘computer says no’ and poor value for money are starting to end, and we’re keen to accelerate the pace of change.

Learn more about how you can pool your funds with others to make your money work harder


Apply for flexible and transparent funding for business

Or simply stay in touch.  We’d love to keep you updated with progress.

Photo used under creative commons license