The future of finance - as imagined by Ryanair

No frills finance is taking off - and while many have an opinion on allocated seating, printing your own boarding pass and paying for food on-board, the model remains simple but thrilling.

When Easyjet, Ryanair and Jet2 launched they shook up an airline industry dominated by high prices and package holidays. They were able to offer a direct and simple way to get a better rate on your seat using the internet. They offered a new way to travel, giving people unprecedented access to air travel on a scale never seen before. While many have an opinion on allocated seating, printing your own boarding pass or paying for food on-board, the model was simple but thrilling – give the customer a low-cost, destination rich, frill-free option and see if it flies. It did, and became the new normal.

Fast forward 20 or so years, and something similar is happening in finance. While a few canny and charismatic entrepreneurs drove the adoption of low cost flying, it is a combination of people power and the latest technology that is revolutionising finance in this digital age - taking the frills out of finance but putting great rates back in. An example of this would be the peer-to-peer finance industry, which innovation specialists Nesta calculate to be currently worth a staggering £482 million in 2013 alone. Not enough to topple High Street banking yet, but certainly enough for mainstream customers to take notice. Peer-to-peer lending businesses have taken a very old model in banking, which is essentially lending and borrowing, and modernised it through online platforms to offer a more direct, open and transparent way to lend and borrow. It is a product that offers reward balanced against risk as platforms aim to diversify the risk, only lend to most credit worthy borrowers and some platforms even have safeguard funds in place in case of a default. There is also a social element as many lenders appreciate the community spirit involved as they are helping people finance a new car or home improvement or supporting a business to grow through a business loan. The return for enabling this is personal, and provides a financial incentive which currently offers returns two or three times higher than the rate of inflation. Meanwhile, high street banks offer savings rates so low that in real terms its costing people to save money.

In October 2013 the industry warmly welcomed the draft measure outlined by the Financial Conduct Authority (FCA) for regulating peer-to-peer lending. Put simply, regulation will help improve trust in an industry that is still growing and open it up to a whole new consumer audience. How they are regulated is one of the most common questions asked of peer-to-peer lending platforms, as there is an added level of perceived safety that regulation seems to bring to any industry. Some have speculated that regulation may stifle the creativity of those currently operating in the sector, but the majority believe it will normalise and legitimise these more democratic forms of finance.

With all businesses more accountable and connected to their customers than ever before, repairing the damage caused by the financial crisis is proving tough for traditional financial institutions. While there will always be a desire to have a transaction based relationship with banks, the increasing popularity of alternative finance options cannot be ignored. Startling growth rates of 200 per cent year-on-year have been predicted for the peer-to-peer lending platforms over the next few years, helped on by regulation and other benefits that this allows like tax free savings in ISAs. The take-off of peer-to-peer lending has been steep but it’s for many that regulation will bring about a smooth landing, with higher volumes of passenger numbers in 2014.

Giles Andrews is CEO and Co-Founder of Zopa

Could the principals of budget aviation be applied to finance? Photograph: Getty Images.
Giles Andrews is CEO and Co-Founder of Zopa
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Inside a shaken city: "I just want to be anywhere that’s not Manchester”

The morning after the bombing of the Manchester Arena has left the city's residents jumpy.

On Tuesday morning, the streets in Manchester city centre were eerily silent.

The commuter hub of Victoria Station - which backs onto the arena - was closed as police combed the area for clues, and despite Mayor Andy Burnham’s line of "business as usual", it looked like people were staying away.

Manchester Arena is the second largest indoor concert venue in Europe. With a capacity crowd of 18,000, on Monday night the venue was packed with young people from around the country - at least 22 of whom will never come home. At around 10.33pm, a suicide bomber detonated his device near the exit. Among the dead was an eight-year-old girl. Many more victims remain in hospital. 

Those Mancunians who were not alerted by the sirens woke to the news of their city's worst terrorist attack. Still, as the day went on, the city’s hubbub soon returned and, by lunchtime, there were shoppers and workers milling around Exchange Square and the town hall.

Tourists snapped images of the Albert Square building in the sunshine, and some even asked police for photographs like any other day.

But throughout the morning there were rumours and speculation about further incidents - the Arndale Centre was closed for a period after 11.40am while swathes of police descended, shutting off the main city centre thoroughfare of Market Street.

Corporation Street - closed off at Exchange Square - was at the centre of the city’s IRA blast. A postbox which survived the 1996 bombing stood in the foreground while officers stood guard, police tape fluttering around cordoned-off spaces.

It’s true that the streets of Manchester have known horror before, but not like this.

I spoke to students Beth and Melissa who were in the bustling centre when they saw people running from two different directions.

They vanished and ducked into River Island, when an alert came over the tannoy, and a staff member herded them through the back door onto the street.

“There were so many police stood outside the Arndale, it was so frightening,” Melissa told me.

“We thought it will be fine, it’ll be safe after last night. There were police everywhere walking in, and we felt like it would be fine.”

Beth said that they had planned a day of shopping, and weren’t put off by the attack.

“We heard about the arena this morning but we decided to come into the city, we were watching it all these morning, but you can’t let this stop you.”

They remembered the 1996 Arndale bombing, but added: “we were too young to really understand”.

And even now they’re older, they still did not really understand what had happened to the city.

“Theres nowhere to go, where’s safe? I just want to go home,” Melissa said. “I just want to be anywhere that’s not Manchester.”

Manchester has seen this sort of thing before - but so long ago that the stunned city dwellers are at a loss. In a city which feels under siege, no one is quite sure how anyone can keep us safe from an unknown threat

“We saw armed police on the streets - there were loads just then," Melissa said. "I trust them to keep us safe.”

But other observers were less comforted by the sign of firearms.

Ben, who I encountered standing outside an office block on Corporation Street watching the police, was not too forthcoming, except to say “They don’t know what they’re looking for, do they?” as I passed.

The spirit of the city is often invoked, and ahead of a vigil tonight in Albert Square, there will be solidarity and strength from the capital of the North.

But the community values which Mancunians hold dear are shaken to the core by what has happened here.

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