Please, sir, can I have some more?
To paraphrase the film Apollo 13: “Britain, we have a problem”.
The Bank of England recently revealed there is a staggering £1.15 trillion sitting in UK cash deposit accounts. It’s earning little to no interest, while millions of us are headed for an uncertain financial future because we’re paralysed by the fear of investing.
Thankfully, there are signs that alternative finance could lift us out of this trap. The most recent NESTA report on alternative finance found the UK market to have more than doubled in size each year since 2012. From £666m in 2013, alternative finance is expected to account for £1.74bn worth of investing and donating activity in 2014. Its remarkable success in recent years is testament to the appetite for a more honest, transparent and – crucially – socially useful investment landscape.
It is these aspects of our industry that gives us the most value to consumers. We are accessible; we are honest. We are looking to generate wealth for others in the economy, instead of merely serving ourselves. And we’re doing this in ways that gives savers the returns they deserve.
Evidence from the independently commissioned Great British Money Survey suggests that if we are to help people take the first step and start investing, we need to stick firmly to these principles.
Simplicity
Ease of understanding and purchase is considered as important as financial returns, with 84% of people saying it is a key factor in their investment decisions.
Alternative finance has proven it can deliver this. Most of us operate online platforms that clearly set out the investment proposition in an easily accessible place and format. Many of us also have detailed risk sections on our websites, in compliance with FCA guidelines.
Purchase is similarly simple, involving no more than a card deposit of bank transfer. This is particularly appealing to a new generation of investors, for whom online banking and purchasing is second nature.
Control
There are two aspects to having control of your money, which are equally important to people. 60% of those surveyed agreed with the statements:
– “I like to know where my money is invested to get a return”
– “I like to be in control and choose where my money goes”
As such it is clear that control is the overarching theme, with the desire for knowledge encompassed in it. Both these things are also offered by the alternative finance sector. All the big platforms make it explicitly clear where your money is going, what it is doing and how it earns an income. Choice is rife, both between platforms within the sector and on individual platforms between different projects.
Wider benefit
This may come as some surprise to the more traditional finance sector, but it is arguably a vital component of alternative finance’s success. Around 50% of people said that social or environmental benefit was an important factor when considering how they choose to invest their money.
We’re social beings, and alternative finance is allowing our money to reflect that. It allows people to invest in things where they can see their money making a real difference – to communities, the environment, or even individuals. And they’re seeing for themselves that earning a decent return doesn’t need to come at the expense of these things.
So as we round off another successful year and look forward to 2015, let’s continue to do what we do best and offer savers what they really want from their investments.
Risk warning
Part or all of your original capital may be at risk and any return on your loan or investment depends on the success of the project. Investments tend to be long term and may not be readily realisable. Estimated rates of return are variable and estimates are no guarantee of actual return. Specific risks with each product will apply. Consider all risks before investing.