Proplend plans IFISA extension but warns of bank-like inefficiencies
PROPLEND is planning to extend its recently-launched Innovative Finance ISA (IFISA) to more investors after successfully bringing pre-registered clients on board.
The commercial property peer-to-peer platform is looking to make a decision at the end of the month, as demand from investors for the new tax-free wrapper stays strong.
The firm soft-launched the product at the end of May to about 500 investors who had pre-booked the offering, as it sought to ensure a smooth administrative process for the flexible IFISA – which allows investors to withdraw and replace funds in the same tax year.
“The flexible ISA is a very complicated instrument and we are trying to automate it, so that is a bit difficult,” Proplend’s chief executive Brian Bartaby told Peer2Peer Finance News.
What makes operations yet more complicated is the fact that the ISA manager needs to process investors’ request for transfers from their other ISA accounts, Bartaby added, which sometimes translates into bank-like inefficiencies.
About 40 per cent of Proplend’s current ISA inflows come from investors transferring funds from previous tax years’ ISA accounts. In these cases, the platform needs to go through more authorisation forms and deal with other ISA providers – often mainstream banks – to carry out the fund transfers.
Bartaby said some third parties would finalise the transfer electronically within 24 hours, while others would send the platform a cheque, which then needs to be cleared, further slowing down the process.
“Technology-wise, it’s a bit of a step backward, for an industry so committed to innovation,” warned Bartaby.
“The fintech sector is trying to create efficiency, but this process is bringing us back to the world of banking.”
Bartaby said there is an attempt in the industry to set up a stand-alone clearing system for IFISAs, mirroring a similar system for pension products transfers, but it would need all IFISA managers to sign up in order to reach efficiency.