My bank, Nationwide, has just made me an offer. If I pay them ten pounds a month, I get a special account, which gives me the following benefits.
- Free worldwide travel insurance for you and your family, including winter sports, golf, wedding and business cover
- Free Worldwide mobile phone insurance
- Free UK & European breakdown cover
- 3% AER (2.96% gross p.a.) variable in-credit interest on balances up to £2,500
Is this a joke?
They say it’s designed to make my life simple.
Let’s take each point.
Starting with the travel insurance.
I don’t have any family, who are dependent on me. I don’t do winter sports or golf. I don’t have any plans to get married and my business, if I have anything is enjoying myself.
I suppose I do need some form of travel insurance, but at the moment, I’ve no plans to go outside of an area, where I get decent healthcare on my EHIC.
The mobile phone insurance is irrelevant, as I use a £10 phone for my communications. If I lost it, I’d just buy another in the nearest O2 shop for a tenner.
Is the third point about breakdown insurance serious? I don’t have a car.
But I reserve my highest condemnation for the derisory interest rate on savings. I’m getting a safeguarded five percent on over a hundred thousand pounds with Zopa. So it’s not government guaranteed, but the company is run by people with intelligence and not a wunch of bankers.
There is no mention of the features I would like.
- Text messages every time, a transaction over a particular amount happens on a credit card or bank account.
- Annotated statements, that allow me to comment on transactions. Taken to its logical conclusion, you could even add a cost code, which could then be used by software to create a simple set of accounts.
- Full tracing on cashpoints, I’ve used. I’ve noticed that the records of those I used in Switzerland are much more detailed than the one I used yesterday in Islington.
- Customisation of my bank account, so that I set levels for alerts, withdrawals etc.
There is an opportunity out there and the first bank to go that way, gets my business.
If you wanted to get money out of someone else’s bank account, all you need to do is login to their computer and have the equipment necessary to perform a transfer.
My bank account is probably as secure as any other, but I never keep my card reader and the card together. Admittedly, all card readers for Nationwide are the same, but my passwords are only written in my brain.
But if you did manage to login, you could perform a transfer to your bank account, but it would probably require me to give in to threats to release the passwords.
But with a site like Zopa or Ratesetter and probably many others, where the only transfer out of the account can be to the bank account, where the money came from in the first place, you’d have quite a problem getting round the security measures. The very fact, that they exist, would probably mean you’d try to crack a more mainstream system, like an account with one of the major banks.
It illustrates how often a simple absolute rule, is often a much more secure method of protection, than something based on complicated hardware and tortuous passwords.
Read it, remember the salient points and if you don’t swallow the message about the banks, you don’t deserve to have your savings protected. Take this statement from Giles.
A lot of banking is in a black box and consumers don’t really know what happens. Give your money to Barclays, in a savings account, and god knows that happens to it. Is it going half way round the world to buy some weird book of securities, or is it being lent to a small business in Sheffield?
A lot of people put their money in the Co-operative Bank because of reasons like this.
There is a good review of peer-to-peer lending in The Times today. One of the most significant things of the piece is that Google has taken a small stake in Lending club. There’s more on the Google deal here.
The banks might not like it, but the writing is on the wall.
Today, I’ve started to move my working deposit account to Zopa.
I have just sent this e-mail to Rate Setter.
I’ve never really got into Ratesetter, so I’d like to close everything down, or at least withdraw the money that has not been lent.
It’s just that the concept of the site requires a lot of managing and as Zopa now has their Safeguard product, which gives me a reasonable rate and quite a bit of security, I might just as well have the use of the money or give it to charity.
I’ve just logged in to my Nationwide bank account and they gave me a soft Internet sell on their ISAs.
They were offering a guaranteed pittance of 2.5%
I get a guaranteed rate of 5%, admittedly before tax, with Zopa.
We live in interesting times!
Zopa has introduced a product called Safeguard. Read what Which says about it here. Here’s the first paragraph.
Zopa, the UK’s leading peer-to-peer (P2P) site, has today announced it has created a ‘safeguard’ to pay out to lenders even if a borrower defaults on the money owed.
Having just put some money into the new product, it would appear that the process is now totally add money and accumulate the interest.
The most interesting thing about this product, is why if an independent company can give a rate of return of 5% or so, why can’t the banks?
This article from the Independent is a good summary of the state of the peer-to-peer lending market at the present time. This is the first couple of paragraphs.
Many people were sceptical about peer-to-peer lending and questioned whether it would ever take off in the UK, but with savings rates from banks and building societies suddenly hitting rock bottom this new sector is becoming increasingly popular.
With traditional savings rates having fallen by more than a third in the last six months, returns on offer from the peer-to-peer providers are looking even more attractive.
Compared with mainstream banking, this new breed of finance is still in its formative years, with Zopa launching as the UK’s first peer-to-peer marketplace in 2005.
But read it all, as there is some very useful information.
I suppose savers’ biggest question, is would you lend your money in an industry, that is just eight years old?
I’ve been on board Zopa, for around five years and can say it has been an enjoyable and profitable ride for myself.
It’s the cash ISA time of the year and I’ve just been looking at the rates. As to what an ISA is, it’s probably best summed up by this page in Money Saving Expert. Here’s the first paragraph.
A cash ISA is just a tax-free savings account. You don’t need to lock the cash away, many are easy-access. Each tax year EVERY person over 16 in the UK can put a new £5,640 in these accounts that pay up to 2.8%. And once in there, the money stays tax-free, year after year.
The rates are derisory and are very poor compared to what I get from Zopa.
Admittedly, there are tax advantages, but why can’t I get those with a peer-to-peer lender if I agree to lock my money away for several years?
I sometimes get involved in helping research projects at Liverpool University and I will also lob small amounts of funding towards projects I think are worthwhile.
I also look into innovative ways of raising funding for individuals and businesses, like Zopa and Funding Circle. I also loan money to the Developing World using Kiva.
So can their methods be used to raise funding for research projects.
Let’s take a researcher interested in how patients manage with the gluten-free diet, they need for coeliac disease. They perhaps want to interview as many patients as possible and produce a report that highlights both the problems and the successes, possibly on a regional basis.
So they have two needs.
A small amount of money is probably required, the size of which would depend on the size and scape of the project.
The second thing, that many projects, like the mythical one I outlined, often need subjects for the research.
Surely, a properly designed system could do both.
Similar things have been done under the general heading of crowd funding. There’s more here on Wikipedia.
The on-line system would be uploaded with suitable research projects, which borrowing from Zopa’s methods, would be checked as to the veracity of the researcher.
Prospective funders and participants would join and then search for projects, they might like to support, just like you search for suitable borrowers on Kiva.
Obviously, you could also rate researchers, just as you rate buyers and sellers on eBay.
There are some obvious winners, if this could be made to work!
I know from those in Universities, I’ve talked with, that getting funding for small projects is difficult and a lot of time and money is wasted.
Are there going to be any losers? Not directly, but I suspect some charities and their inefficient structures might be by-passed.
I will probably not develop the system, but someone will! On the other hand, if anybody wants to, I’ll be happy to advise.