Zopa closure: P2P industry reacts
After 16 years, Zopa is exiting the peer-to-peer lending space, leaving an enormous gap in the market and raising questions about the future of consumer P2P.
We asked industry stakeholders and platform bosses where Zopa’s exit leaves the P2P lending sector, and whether the news took them by surprise…
“It makes commercial sense”
David Bradley-Ward, chief executive of Ablrate, said that the news didn’t come as a surprise.
“With their move to being a bank it makes commercial sense,” Bradley-Ward commented.
“Also with the Financial Conduct Authority (FCA) restrictions and attitude to the sector it would not surprise me if more companies choose to pivot to another business model.”
“It was clearly coming soon”
Just a few days ago, Neil Faulkner, chief executive at P2P research firm 4th Way, told Peer2Peer Finance News that he predicted Zopa would close its P2P lending business in 2022.
“Zopa was certainly going to do this for banking and business reasons, rather than for the reasons it stated,” Faulkner said, following this morning’s announcement. “It was clearly coming soon, although I didn’t realise it would be within days of my forecast!
“Zopa had no choice ever since it opened a bank, because it needs to switch to balance-sheet lending to make the bank succeed. This way, Zopa takes all the profits from the loans instead of passing the bulk of the rewards to individual investors. Its savers will instead get a much lower return, albeit with Financial Services Compensation Scheme (FSCS) protection and almost guaranteed easy access.
“Running a P2P lending business in parallel simply strips away the bank’s ability to use its borrower and saver base to lend for itself.”
“It is not possible to scale P2P lending”
“I did not expect it but I am not surprised,” said Nicola Horlick, chief executive of Money&Co.
“It is not possible to scale P2P lending as there are not sufficient ‘safe’ lending opportunities based on the original model of individuals lending to small- and medium-sized enterprises (SMEs). That is why we have developed our specialist lending verticals, which we do make available to individuals as well as family offices and institutional investors.”
“Its sad”
“It was always clear that would happen as the Zopa Bank could fund for far less cost, but it remains sad that the original UK P2P platform has closed to retail investors other than its bank savings accounts at lower rates,” says Stuart Law, chief executive of Assetz Capital.
“And we remain open to any Zopa investors who wish to move over to ourselves.”
“Their exit has been long signalled”
Bruce Davis, chief executive of Abundance Investments, and a co-founder of Zopa’s original P2P business, said that Zopa has been pretty upfront with its need to move to a different way of funding their lending and credit side, adding that “this is more confirmation than surprise.”
“The sector has changed out of all recognition since the early days when Zopa pioneered this new form of lending and borrowing, and it has diversified hugely both in terms of the business models and then assets classes available to investors,” said Davis.
“As Zopa themselves say, the sector has suffered for the actions of a few rogue firms but their exit has been long signalled as they transitioned to a banking based model of credit and lending which I hope will bring much needed competition and innovation to challenge the incumbent institutions in that sector.”
“There is a gap for retail investors”
“I don’t think anyone in the industry is surprised by this announcement as Zopa had blocked new P2P investors from signing up from about 2019 and had moved towards offering term deposits at less than a two per cent AER,” said Rob Pasco, co-founder and chief executive of soon-to-launch consumer P2P platform Plend.
“What this demonstrates is the gap for retail investors who are hunting from yield but are being pushed out by institutional means fuelled by a decade of low interest rates.
“A lot of P2Ps (like Plend) in more alternative or higher risk asset classes will be jumping to acquire these customers who will be looking for a home to deploy their refunded capital from Zopa.”
“We were saddened to hear the news”
Folk2Folk’s managing director Roy Warren said that the door is open to Zopa investors who want to continue to invest in P2P loans via his platform.
“We were saddened to hear the news this morning that Zopa has decided to close the retail investment side of its business,” Warren said. “They join a growing list of P2P platforms that have closed their service to retail investor customers, but we haven’t closed our door to folks.
“Both sides of our business – borrowing and investing – are about helping people. We want to help business owners access finance; and we want to help people with cash to invest, to benefit from earning a great return while also knowing their money is helping others – a double reward.
“As such, we feel it’s important to continue to provide a viable, alternative investment option for individuals.”
“It is not a blow”
Noman Akram, a director of Connective Lending, said: “There are other platforms that have become more dominant in the P2P lending sector.
“Zopa of course being the original player, it is a shame to see it exit.
“The P2P sector has now grown, it has gone outside of what Zopa is and was. Given the new platforms introduced in this area, it is not a blow.
“It is more important to focus on ensuring platforms can remain solvent and produce safe investment returns in the long term.”
“P2P lending continues to evolve”
Rishi Zaveri, co-founder and chief executive of Lendwise, said that “P2P lending continues to evolve like all other areas of financial services and Zopa’s decision to focus on its banking operation forms a natural part of that process.”
“Its decision to step away from the market doesn’t diminish the future of P2P or its credibility,” Zaveri added. “There have been some regrettable incidents in the sector involving certain platforms but that doesn’t mean there isn’t an important role for other robust, credible consumer lenders to play.
“There are plenty of good peer to peer lenders committed to providing competitively priced loans to borrowers and delivering healthy returns to investors. For the right investor, peer-to-peer investing can make up a valid part of their portfolio, particularly in the current environment of low interest rates and rising inflation.
“However, what’s important is that all peer-to-peer lenders give access to the right type of investors. This is where the FCA is concentrating its efforts while also tightening regulations to prevent any bad operators from tarnishing the good reputation of others.”
Read more: Zopa to announce profitability as post-P2P plans emerge
Read more: Boost for fintechs as FCA updates listing rules