How to earn Income from financial assets has become the million dollar question. It seems that one has to choose a significant trade-off between income and credit risk, liquidity risk or interest rate risk.

Welcome to a world in which Disney just placed $2billion of corporate bonds-notes ranging from 3yrs to 30yrs, at the record low levels. Welcome to a developed world plagued by negative government yields.

Source: Pension Partners

The world still needs current income for a variety of reasons: wage stagnation, tax overburdening, and the usual cash flows needs that are not at all well managed. There are actually a couple of Fintechs that are focused on this basic need, cash flow management, for individuals, small businesses, or corporations (we looked at some examples of Fintechs for smallbiz cash flow mgt ).

In search of income as digitization of financial services continues

Raisin is the German startup that has targeted the European continent and offers the best savings rates from partner banks. Raisin is a crossborder business and has already claimed the #1 position as a Pan European deposit marketplace (100% guaranteed deposits). It has transacted more than a 1billion euros with 45k customers onboarded, in just a couple of months since launch. Current partners, are banks from Poland, Chez Republic, and Austria.

Referral gamification and a visually engaging social campaign, are strong elements. I couldn’t help nbut notice their campaign last week on Twitter “

Hard to picture what are you saving for? Not anymore. Come to our South Bank installat. to make yours #RaisinDreams

Challenger banks in the UK have been offering bonds (3yrs or less) to entice customers to sign up on their platforms. I knew about Metro Bank, but as I researched this more, I came to realize that UK banks have been competing on this front and posting best-buy deals. Challenger banks reduce their rates as they move from infancy, to kindergadren. In a May report the best savings included

Similar, tactics that really mean squeezing margins and applying a ‘race-to-the-bottom’ approach, are used in other countries too.

There are two Alternative finance options that can generate income, much like high yield bonds or publicly traded REITS have been doing in normal conditions.

Investors in the UK can invest in the LE listed Funding Circle Small Business fund (FCIF) which however, can trade below NAV and therefore, eat into the cash flow distributions. One can also, start investing directly into P2P loans using Orca Money for example and taking advantage of the tax advantages of such investments that the UK government adopted in April. This however, is more a DIY investment that needs time to understand the nuances and manage appropriately the risks.

The other ALtfi option, doesn’t require that much involvement but is less liquid because it is not publicly traded. It is the private and direct investment version of a publicly traded REIT. Essentially, the investor buys ownership into a portfolio of real estate investments (direct, no intermediary) that offer a cap rate that generates income (a long time favorite of savers). Fundrise, is a US online platform offering eREITs with a $1,000 minimum. Their Income eREIT is the one that can be considered as an option for income generation.

Income sources remain with banks (fixed term deposits or notes; loans or real estate). Bank debt, Challenger bank discounted offers, are no innovation. P2P loan portfolios and Income eREITs, from Fintechs are an innovation, which requires a more involved investor and a more developed secondary market.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge Network.  Efi Pylarinou is a Digital Wealth Management thought leader.