What the UK leaders of digital banking think. Luminaries from three of the Uk’s digital banks discuss what’s on their minds for this year. The gist seems to be that the big banks are shedding customers in their boatloads thanks primarily to physical bank closure programs and the digital boys and girls are picking up the slack. Fair enough I suppose but with the FCA worrying about how the bricks and mortar based traditional bank disappearance program is leaving some customers cold and disadvantaged perhaps means that some innovative thinking might be worthwhile. As I look at the property portfolio the majors have here in the Uk and elsewhere I do think it makes them look at bit more solid than their digital counterparts. As far as business acquisition ideas are concerned it seems that small business is on their minds. The problem here and in every other type of banking is how do you make any money at it. I know I bang on about this week in and week out but with interest rates at more or less zero there just isn’t an easy answer. ROE is a key ratio in any business but particularly banking but it is difficult to see with the current ROA and restricted leverage how the P word can be achieved and that is pretty basic to being in business.
As I have mentioned before this tax on moving has at least united everyone to agree that it should be removed but it is far from certain that it is going to be. This was a principal factor in the mini boom in residential property prices over the past year which pushed prices up as people rushed to complete before the dispensation ended. The longer term impact however is unknown. What is clear however is that the market looks stressed, Some 450 thousand residential renters are now in arrears and thousands of High Street sites remain empty. The impact on security coverage cannot be ignored forever. Most of the big lenders have toughened up their criteria making moving even more difficult and the commercial lenders don’t seem to be saying very much. I think there are a lot of very worried people out there in the real world. Property prices are not irrelevant and a liquid but stable market is essential to a well functioning economy. This year we have seen property price rises when they really shouldn’t have. Is this an economic optical illusion? Watch this space.
Back to the end of the lending market that nobody likes. The high risk, high interest rate sector of the personal lending market has seen a number of casualties and it looks like it might see a few more. There is a really terrible dilemma here. The clients of these companies are the people that nobody else wants and come under fire from all sides, clients, auditors, regulators you name it. Part of the problem seems to be deluge of claims for compensation for being sold unaffordable credit. It appears that some of these companies have not disclosed potential liabilities despite sign off from their auditors. One thing about this article caught my eye it appears that there are a lot of key workers who are their clients and a lot are low paid NHS workers. It is easy to see how this could turn into a very emotive issue indeed. Yet this sector does provide a regulated service to a small but socially important groups of already fairly deprived people. If these guys won’t lend to you then the only person who will might be less than worried about regulation. It’s a big problem for regulators all parties should put some more intellectual thinking into how to do it properly but humanely and still keep it operating.
Howard Tolman is a well-known banker, technologist and entrepreneur in London,
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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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