Zopa

History

Zopa was founded in Buckinghamshire in 2004 by a team from the internet banking company Egg Banking, and originated its first loan in 2005. It was the first peer-to-peer lending company and one of the earliest fintech firms.

The New York Times reported "amid the economic slump" due to the financial crisis of 2007–2008 Zopa "abandoned its own costly push into the United States."

In September 2016, the first portfolio of Zopa loans was securitised on the European markets.

In November 2016, Zopa announced that it would apply for a banking license.

Business Model

Zopa enables investors to lend to UK consumers directly through its peer-to-peer lending platform.

Borrowers can take out loans between £500 and £25,000. Typically individuals use these to funds to help buy a car, consolidate debts, cover home improvements or weddings. All applicants are credit-checked by Zopa.

Investors’ money enters a queue to be lent in one of three products, which vary according to the risk, returns and accessibility they offer. Once the money reaches the front of the queue, it is split into micro-loans (typically of £10-20 each) that go to multiple borrowers. Investors then receive monthly repayments of interest and capital, which they can relend to compound the interest.

In 2005 the BBC reported that "customers borrow at the interest rate that suits them, based on their personal credit rating. In addition, they must pay a one-off fee equivalent to 1% of the loan they take out." Further Zopa sells "loan payment protection insurance to borrowers" and Zopa does not charge lenders a fee to use the exchange.

Safeguard

In May 2013 Zopa introduced its Safeguard Fund, which covers investors’ losses if a borrower defaults. This was because peer-to-peer investors could then not offset their losses against tax.

The Safeguard Fund has paid out all losses to date, but there is no guarantee it will do in the future.

Bank launch

In November 2016 Zopa announced its intention to apply for a banking license so it could expand the range of financial products it offers to UK consumers

Zopa’s bank is scheduled to launch in 2018 and will sit alongside the peer-to-peer lending business. At launch, Zopa plans to offer FSCS protected deposit accounts to savers and overdraft alternatives to borrowers.

Current operations

Zopa operates only in the United Kingdom.

Defunct operations

The New York Times reported in 2006 that then Zopa CEO Richard Duvall announced that Zopa "planned to start a site in the United States to compete with Prosper this year." In 2008 the New York Times reported that Zopa had withdrawn from the United States "citing adverse market conditions, and two San Francisco-area companies, Lending Club and Prosper, have encountered problems with securities regulators and were forced to stop all trading on their sites."

In 2006 it launched in Italy and also Japan. But these operations have since closed.

Finances

In 2006 the New York Times reported that Benchmark Capital was backing Zopa.

In 2012 the New York Times reported that RIT Capital Partners in 2012 invested in Zopa though the venture capital vehicle Augmentum Capital.

In 2014 the Financial Times reported that the London-based hedge fund Arrowgrass Capital Partners had invested £15m.

Zopa is backed by Bessemer Venture Partners and Runa Capital.

Partnerships

It has established partnerships with other challenger businesses, including Uber, Airbnb and Metro Bank

Zopa is a founding member of the Peer-to-Peer Finance Association, which was established in 2011. Giles Andrews, Zopa’s then CEO was its inaugural chair. Along with the other P2PFA members, Zopa publishes details of its loan book on the P2PFA website each month.

CEOs

Since founding in 2004

Headquarters

The company is currently based in London Bridge

Zopa etymology

Its name stands for "Zone of possible agreement", a negotiating term identifying the bounds within which agreement can be reached between two parties.

Industry

By 2014 the Financial Times reported that the largest peer-to-peer loan platform was Lending Club and within Europe it was Zopa.

Market Composition

In 2008 the New York Times reported that "Prosper, Zopa, Lending Club and others bring together would-be lenders with small-business borrowers."