Capital Markets Corporate

June 28, 2019

Our Weekly Newsletter

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Across Instinctif Partners’ Financial Services team, we are always keeping an eye on the key developments taking place across the sector to evaluate their impact on the many businesses we work with. Here we share our picks of the week’s most interesting news, and our expert views.

One hand giveth while the other taketh away
Loyal savings customers are increasingly seeing their savings deals eroded as banks and building societies compete to offer better mortgage deals for borrowers. Banks are also increasingly relying on low-paying accounts to fund loan deals, as shown by a recent report by the FCA, which revealed that the funding benefit, rather than overdrafts, was the largest source of revenue for banks. (From The Times, 23 June 2019)

Easy debt threatens young spenders
Despite the growing popularity of “buy now, pay later” digital debt propositions such as Klarna, charities are warning that the no-interest promises risk pushing more young people into debt. By allowing consumers to pay in instalments over time at no extra cost, the industry is using the psychology of presenting customers with a series of smaller, less intimidating looking payments than a single large one, even if they are the same amount. (From Financial Times, 23 June 2019)

Customers at a loophole loss
A new study has found that personal loan borrowers are typically charged 6% by banks, 2.6 percentage points higher than the advertised rate of 3.4% – equivalent to an extra £453 in interest payments. This means that customers could be at risk of losing hundreds of pounds thanks to a regulatory loophole which only requires 51% of successful loan applicants to be offered an advertised interest rate. (From The Telegraph, 23 June 2019)

Fintech: is it all hype?
Fintech firms are facing growing challenges as many continue to struggle to demonstrate profitability, or at least a clear path towards it, as mainstream uptake remains far from exponential. Even younger customers, ready to adopt the financial technology revolution, are mostly using their new accounts in a secondary role, as opposed to the primary accounts into which their monthly salaries are paid. This comes as research also showed that the top ten banking apps by usage are still those of the established high street banks. (From The Times, 24 June 2019)

Monopoly’s modern makeover game
Rich Uncle Moneybags and his paper-money Monopoly game are getting a makeover, turning the well-known character into a voice-activated digital assistant ready to catch cheats, all while going fully cashless. Modelled after digital assistants such as Amazon’s Alexa, the new game character design will now include a top hat-shaped smart-speaker, allowing players to talk to him and to handle the game’s transactions. (From The Daily Mirror, 25 June 2019)

The rise and rise of impact investing
In what can only be seen as a positive trend, impact investing is quickly becoming a mainstay of the investment world as investors look to do right with their and/or their client’s money. Moreover, the UK is set to become a global hub for impact investors with the launch of an institute to help guide monies towards crucial social needs. To support the growth of the sector, Instinctif Partners is launching a new impact investing proposition, advising companies with a clearly defined objective for improving lives.

Impact investing, one of the fastest segments of the asset management industry, is soaring. A recent survey by the Global Impact Investing Network (GIIN) found that 266 of the world’s leading impact investors manage a total of US$239 billion in impact investing assets. Beyond just a fashionable trend, impact investing is now a “must have” for investors who see doing social good a crucial aspect of money management.

The UK is quickly positioning itself as a global leader in impact investing. This month, the first Impact Investing Institute was announced in London.  The goal is to raise awareness among retail investors to choose vehicles that put their savings and pensions into schemes that they care about. Culture secretary Jeremy Wright said: “More people than ever before want their savings and investments to make a real difference to people’s lives and the planet, while still generating a return.”

The desire to ‘do good’ is shifting how wealth management approaches clients. Wealth managers are now being warned that they must be able to advise on impact investing to ensure they carry favour with the children of HNW clients. It’s also being seen as a way for financial planners to help identify an investor’s core values and help mould an entire portfolio.

Impact investing is also shifting how philanthropy is managed. Recent reports have detailed how UHNW philanthropists are make increasingly ‘wild’ investment choices by forgoing traditional donations to art galleries or universities and instead investing in programmes and services that protect natural resources.

To take advantage of the rise of impact investing, a wave of social investing apps are being created that allow people to micro-invest in good causes. Using the popular robo-investing method, fintechs are raising money fast to take advantage of the fact that millennials are twice as likely to invest in a portfolio that reflects their “values and beliefs”.

Moreover, impact investing is predicted to turbo-charge fintech development. Experts have noted that to get more money into developing nations that do not currently have a mature financial infrastructure, technologies like blockchain will have to be fast-tracked so as to be able to invest and spend the growing billions earmarked from international social investment.

As impact investing matures, so does the need to better articulate and promote impact investing propositions. As such, this week Instinctif Partners launched Instinctif Impact – advising impact investors and companies generating positive environmental and social impact across sectors including financial services, energy and technology. The launch of the new offering builds onInstinctif’s work with impact-led companies, such as Bamboo Capital Partners and BBOXX.

Rishi Bhattacharya, Managing Partner at Instinctif Partners said: “Communications plays a vital role in illustrating the value of impact for business. We are therefore delighted to launch Instinctif Impact to help new and existing clients communicate to a range of stakeholders how they are improving the lives of people across the world.”

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