Alt Lending:Mini Bond Sales, Infrastructure, Credit Card Lending

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Here is our pick of the 3 most important Alt Lending news stories during the week:

 1. Mini-Bonds Fiasco Shows FCA asleep at the Whee

“Protecting Consumers. Enhancing market integrity. Promoting competition” There’s no end to the heroic work of the Financial Conduct Authority. If only it had lived up to the hype. A better strapline might be ” Welcome to the home of rearview mirror regulation” 

Why it matters: When banks were actually in the lending business you knew who you were dealing with. The same cannot be said of some of the more shady members of the alt lending family. While it is largely tagged as a regulatory failure in that it took fully 15 months for the FCA to implement the ban it shows the futility of trying to regulate against potentially criminal activity. It also reminds us that arms length involvement with the Financial Conduct Authority or any other governmental quango that purports to make investing less risky is far short of a guarantee. There will always be Fast Eddies cold calling on the telephone offering astronomic yields and representing plausible sounding companies. London Capital & Finance (LCF) was such a company preying on vulnerable, mostly, pensioners to the tune of £ 237million. There have been a string of such cases that all have the same characteristics. This will not be the end of them. Caveat emptor applies no matter who is regulating. Chasing yield is not a strategy. Remember the Icelandic Banks?  

2. Infrastructure. An opportunity for Alt Lenders Post Covid 19

“At least £ 4.1bn worth of ” shovel-ready” infrastructure projects to help the economy recover from the Covid 19 crisis are in the pipeline awaiting the governments green light, according to new research 

Why it matters: As all economies attempt to reboot their economies the same word comes to the forefront. “ Infrastructure”. The British Government is getting ready to approve over £ 4 billion of  “shovel ready projects” to help the kick start the economy. The same thing is happening all over the developed world. The interesting thing this time is that most governments are short of readies and are relying on artificial stimulants already. A lot if not most of these projects have some form of government involvement which should give potential investors some kind of confidence that the whole thing is real and that the motivation can be trusted. So why not try and put these projects on a commercial basis, put a prospectus forward identifying and monitoring the necessary components, information requirements etc. If the identifiable commercial revenues do not justify the risk then some form of conditional and limited credit support might be available to lift the funding to investment grade. Leveraging government support in this way could potentially open up a lot more private money in infrastructure.

3   US Non Bank Lender UPGRADE closes $ 40 million round with the help of Santander

Upgrade, the US alternative lender, has raised a $40m Series D funding round from investors including Santander InnoVentures.

Why it matters: I noticed that a US credit card company had succeeded in closing a  large capital raise suggesting that its growth rate was very substantial during the current pandemic. I am not a fan of the way that credit cards work in practice. As interest rates have fallen to almost or below sub zero levels, retail lending rates look to me like they are rising. The FCA in the UK have issued a yellow card to overdraft  providers after the four largest lenders introduced what looked suspiciously like a cartel which more or less doubled their current charging level. This was totally unjustified but reduced the spread between overdraft and credit card rates considerably. If you can hike rates to cover admin, capital costs, bad debts and client acquisition you’ve got it made. FCA please take note.        


Howard Tolman is a well-known banker, technologist and entrepreneur in London,

We have a self imposed constraint of 3 news stories per week because we serve busy senior Fintech leaders who just want succinct and important information.

For context on Alt Lending please read the Interview with Howard Tolman about the future of Alt Lending and read articles tagged Alt Lending in our archives. 


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