Eye-catching adverts for an app-based start-up called Zeux have been plastered all over the London transport network recently offering 5 per cent interest.
It is billed as a ‘fixed-rate product’ and says people should not ‘accept the low saving interest rates your bank offers you’.
However, despite looking like a new challenger bank – in both its advertisements and website – with a splash of Starling teal and First Direct black on its Visa card, along with enticing interest rates, it is not offering a straightforward traditional fixed-rate account at all.
Adverts for start-up app Zeux have appeared on the London Underground, offering a 5% rate to those ‘losing interest in their bank’. However, it is an unprotected investment product
Glen Goodman, a cryptocurrency expert and author of the book The Crypto Trader, explains: ‘Zeux take your pounds and convert them into a cryptocurrency, which they then send over to their Chinese partner WeCash in Beijing.
‘WeCash then switch the cryptocurrency back into normal currency and lend it out to borrowers.
‘If WeCash and Zeux go bust, your investment is not covered by the Financial Services Compensation Scheme and you could lose all of it.’
You would not discover all of that information from its glossy adverts, however.
WeCash is a China-based credit assessment platform, and while Zeux does explain in the small print on its tube adverts and in the FAQ section of its website that depositors’ capital is at risk when putting money into this 5 per cent paying account, it ultimately markets it using the language of savings – with talk of ‘pot’ and ‘account’.
Goodman added: ‘The way this 5 per cent account is presented really bothers me.
‘They call it a “Fixed Rate Account” and an “Easy-Access Money Pot”, where “you’ll earn £250 interest a year” if you put in £5,000.
‘These terms make it sound like a safe savings account but it’s actually a risky investment product.’
On its website, Zeux has directly marketed its 5% return in comparison to protected savings deposits from high street banks
Zeux can afford to pay the 5 per cent rate as a promotional offer, with the company saying on its site it pays it ‘from our customer acquisition budget’.
It added: ‘Your funds are secured at all times by asset-backed portfolios of over collateralised loans. In addition this fund is secured by both WeCash and Zeux.’
However, ultimately money in this pot is not covered by the Financial Services Compensation Scheme up to £85,000 in the same way as money held in a savings account with a high street bank is, the exact thing it compares itself to.
You can read its response to This is Money at the bottom of the article.
The adverts are the second time in 12 months when adverts for an eye-catching 5 per cent ‘savings’ rate appeared on the London Underground, after an app-based card provider called Dozens went with the same strategy last year.
It asked onlookers if their savings were ‘keeping up with their lunch’, but their 5 per cent ‘Trust Bonds’ were an investment product.
It deposited investors’ money plus 5 per cent interest into an account where it couldn’t touch it.
Last year another financial firm, Dozens, marketed 5% investment bonds using the language of savings. It said the rate was funded from money the company raised elsewhere
It said it had already built the interest rate into the cost of offering the bonds, and were an eye-catching rate to pull in customers being funded from money the company raised elsewhere.
Dozens previously told us: ‘We believe in the importance of having a high interest product for people who are just starting to save and experience interest, which is why we’re willing to fund this product from the revenues earned from our other products, like interchange, FX and custody fees.’
But This is Money wrote at the time that Dozens’ bonds were ‘complicated and difficult for an everyday saver, such as those seeing adverts on London Underground, to ascertain where on the risk scale they stand.’
The appearance of two companies marketing investment products using the language of savings to people who may not be financially savvy does raise questions over how easy it is for financial firms to put up adverts on the London Underground, and what oversight there is of them.
Who is responsible for the adverts?
Have you spotted a financial advert you think is misleading?
This is Money asked the FCA if there was a way for general members of the public to report financial adverts they felt were unclear, unfair or misleading.
It said they can do so on its website here.
Every day, millions of travellers look upon the advertising billboards, digital screens and posters put up on the London Underground.
Adverts for everything from films, to mattresses, to vitamin supplements are plastered across the property of Transport for London, the Government body which incredibly owns a fifth of the country’s advertising space.
Transport for London ran more 16,000 adverts between August 2017 and July 2018, and made £152million in revenue, according to the latest available figures.
Some 479 advertising campaigns were about finance or financial products, but despite this, finance and financial adverts are not given a special place in TFL’s advertising policy.
Indeed, TFL has a special subsection banning adverts for lap dancing clubs, but does not provide any particular guidance on adverts for potentially risky investments.
More than 16,000 adverts ran on Transport for London property between 2017 and 2018, netting it £152m in revenue
Instead, financial adverts must meet TFL’s general advertising policy, which states: ‘An advert will not be approved for, or permitted to remain on, TFL’s services if, in TFL’s reasonable opinion, the advertisement does not comply with the law, does not comply with the UK code of non-broadcast advertising, sales promotion and direct marketing, is not socially appropriate, or is inconsistent with TFL’s obligations under section 149 of the Equality Act 2010.’
TFL told This is Money this means they must abide by section 14 of the Committee of Adverting Practice, which relates to financial adverts.
However, Section 14, which says marketers must present products in a way that can be easily understood by the audience addressed, only covers firms not authorised by the Financial Conduct Authority, the city regulator.
The ASA said it would cover ‘non-technical’ aspects of the adverts, including ‘offence, social responsibility and misleadingness’, but the FCA was responsible if the firm was authorised by it.
This is Money asked Transport for London, the Advertising Standards Authority and the Financial Conduct Authority who oversaw adverts for financial products like Zeux’s
Indeed, firms which use the FCA logo in their advertising, or registered financial institutions who approve financial promotions, are required to check the adverts they wish to run meets the requirements of the FCA.
This should occur before the advertising for that promotion is submitted to TFL for review, but the FCA does not offer providers of advertising space an advertising review service, according to TFL.
A TFL spokesman said: ‘Ultimately, as with all advertising in the UK, it is the advertiser’s responsibility to ensure that their advertising meets the required standards.’
Following this, This is Money went to the city regulator to ask them if, on the back of these comments, it approved financial adverts prior to them being posted up on the tube.
Its blanket rule on adverts requires them to be ‘clear, fair and not misleading’, while firms authorised to carry out investment services, such as Zeux, ‘should not describe a feature of a product as “guaranteed”, “protected” or “secure” unless that term is capable of being a fair, clear and not misleading description of it’.
The FCA did not provide an on-the-record statement, but directed us to a November 2019 letter which said: ‘Before a firm approves a financial promotion for communication by an unauthorised person, or approves its own financial promotions for communication, it must confirm it complies with our rules.
‘Firms must not approve the content of a financial promotion for communication by an unauthorised person, unless they are satisfied that the promotion is fair, clear and not misleading.’
This is Money was told the FCA are responsible for the content of financial adverts, including those on TFL. It told us it was down to firms to ensure adverts followed its rules
However, while this letter sets out a checklist of rules financial firms must follow when advertising, it does not suggest they need to submit their adverts to the FCA for approval prior to submitting them to Transport for London for placement in front of millions of eyeballs.
The FCA added: ‘Our guidance on approving financial promotions is not exhaustive and is not a complete description of the steps which FCA authorised firms should take when approving a financial promotion relating to a retail investment.
‘It is up to financial firms to determine the extent of the analysis or review needed to confirm that a financial promotion complies with our rules on a case-by-case basis.
‘If a financial promotion or advert is misleading, we have the legal power to get it withdrawn or prevent it being used in the first place.’
We previously asked it last year whether Dozens’ adverts were misleading, due to the fact the 5 per cent rate appeared to be marketed as a ‘savings’ product.
However, it told This is Money that it does not comment on individual firms and their advertising.
What did Zeux say?
Zeux founder and chief executive Frank Zhou
This is Money asked Zeux three questions:
1. We asked it to explain how its 5% interest-paying product worked
It replied: Customers buy stablecoins from Zeux, these are then lent out in stablecoin – so that they deliver a return to the customers.
This is achieved by working with our partners.
In this particular case, Zeux works with WeCash, an Asia-based big data credit assessment platform, to help customers take advantage of their network and earn returns from global customer credit.
The reason stablecoins are used here, as an intermediary, is to reduce global banking transaction costs and regulatory and compliance costs.
In order to provide UK customers with access to high-interest rate products globally, we are looking at the areas with higher yield in general, specifically, Asia and the US.
The promotional product has been a reward for our early customers. Due to the high demand and popularity of the product, new customers will soon be put on a waiting list.
The UK market has seen this with other successful fintech challengers and we are pleased to join them.
2. We asked it whether it felt it was misleading to market Zeux directly in comparison to savings rates from high street banks
It replied: It is indeed correct to say that, unlike traditional saving accounts, the Easy Access Money Pot is not covered by the FSCS, it’s a savings account alternative.
Instead, what’s important to note is that the customer’s funds are protected by both Zeux and WeCash by using the capital of both institutions. It’s possible that the average UK banking customer may not have heard of WeCash.
The savings-like alternative it provides to customers is something that is widespread and popular across Asian countries.
The economy is changing and UK consumers need to adapt if they want to achieve interest rates which are common in Asia or the US.
This is where challenger fintech companies like Zeux have the opportunity to bring customers a great product, which offers a high interest rate, and it’s safe at the same time, in a way which is future-proof.
All facts are stated clearly and are accessible to the end-user so they may make an informed decision on whether to choose to stay with a traditional bank with lower interest rates or if they want to look to the future of banking.
3. We asked it if it ran its adverts past the Financial Conduct Authority prior to them being put up on the London Underground
It replied: We work closely with the FCA to abide by their rules and requests.
We’ve been in a dialogue with the FCA regarding the advertising, which has led to comments from them, which we have taken on-board and will continue to work and accommodate these comments in order to meet the FCA’s expectations and requirements.
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