parchedpeas wrote:The mid-term plan for them is to link to people's current accounts and then, when people go overdrawn, they will use the other funds 'on loan' from people in credit to stop people going O/D.
Suppose the app will pop up with a message saying "You're about to go overdrawn at Lloyds / Halifax etc. Either pay the £5 a day fee, or borrow £xx today at x% and don't get hit with the fees"
Then the Chip users in credit will get a return on their savings raked off the back of that.
That might be the plan
, but Chip currently cannot use the money from people in credit to fund loans to those who are overdrawn. It does not have a banking licence. It can only lend its own money, and as at 30 April 2018 it only had £330,991, which is fuck all really. And as it happens, Chip is very limited as to what it can do, as in they don't have FCA permission to do anything at all, they are merely an agent for Prepaid Financial Services Ltd, who presumably do all the processing. Chip only had 3 employees in FY 2018.
https://register.fca.org.uk/ShPo_FirmDe ... 047TqmEQAS
So when they say "we have customers who have £130m of outstanding debt - therefore we have easy access to further demand for our money" they are doing nothing more than signalling the potential for future lending to these customers. As in the 'ChipX community lending' due to launch in January 2019. From looking at the summary of their crowdfunding pitch it looks as if they have all sorts of ideas as to what they want to do including getting 'FSCS protection', but I haven't read the actual documents to get a real understanding.
But it seems to me to be a very niche service, targeted at dumb millennials who are too stupid to realise that you can open a Tesco Bank account and get 3% on your money, without any mucking about with referrals. Their might be enough dumb millennials around to build a business. I don't really know. It's only one of a number of app based fintech companies who are supposedly challenging the status quo. My best guess would be that most of them will fail, and flog their customer base to somebody else.
Some of us remember Interweb Mk1, and how Egg Banking was going to sweep all before it.