Zopa’s journey from P2P pioneer to challenger bank
Zopa has announced its exit from the peer-to-peer lending sector in favour of bank lending and focussing on its initial public offering (IPO).
The consumer lender has come a long way since launching the world’s first P2P platform back in March 2005.
Here Peer2Peer Finance News looks back over some of the lender’s biggest moments from its 16-year history.
Pioneering products
In May 2016, Zopa launched a car finance product, then in June 2017 introduced an Innovative Finance ISA (IFISA).
This year the platform has launched a broadband comparison service and an energy switching and comparison service on its app. In October the lender rolled out its online hire purchase car finance product to Tesco Bank customers.
Trade associations
Zopa was an initial member of the original Peer-to-Peer Finance Association when it was formed in 2011.
In January 2020, this was disbanded and the 36H Group formed in its place with Zopa once again a founding member.
Regulatory challenges
The P2P platform has had to adapt to several pieces of regulation over its lifetime, from the original 36H article for P2P lending, to the post-implementation review in December 2019.
On 9 December 2019, the City regulator legislated for platforms to strengthen their wind-down plans and to set up an appropriateness test for lenders that had not taken advice and placed a limit on P2P investments for retail customers new to the sector of 10 per cent of investable assets.
Technological milestones
In May, Zopa announced that it had partnered with credit score provider and marketplace ClearScore to utilise open banking capabilities for its customers.
It said that this partnership led to a 37 per cent rise in the number of users eligible to apply for a Zopa credit card, improving financial inclusion for thousands of new customers who may have previously been declined due to thin files.
In March, Zopa’s chief commercial officer Tim Waterman said that he was “very excited” about the potential benefits of embedded finance for the lending industry.
Covid survival
During the pandemic, Zopa briefly paused lending to higher risk borrowers and supported borrowers through several tailored options for impacted customers, for example by reducing payment plans or freezing payments for a period of time.
The platform also overhauled its secondary market so that investors could sell loans progressively, rather than waiting until they reach the front of the queue.
Zopa Bank
In June of last year, Zopa was granted its full UK bank licence, paving the way for the official launch of Zopa Bank.
In the following months, the bank unveiled its first savings products to the public and launched its first credit card, which allowed customers to set their own personal financial buffer.
In May 2021, Zopa reported that it had seen total spending on its credit card rise by 110 per cent from January to April.
Recent results
Zopa recently announced that it will achieve full profitability in three weeks’ time.
Last year, Zopa Group saw broadly flat pre-tax losses of £18.1m for 2019, as increased earnings from its P2P lending platform were offset by heavy investment into its new bank.
Zopa’s P2P platform reported its profits rose to £575,000 for the year ending 31 December 2019, compared to £145,000 the previous year.
IPO plans
Zopa is actively planning an IPO next year.
It has raised $300m (£226.4m) in a pre-IPO fundraise, with backing from institutional investors such as SoftBank, Augmentum Fintech, NorthZone, IAG Silverstripe and Davidson Kempner Capital Management.
Zopa has also hired former PepsiCo executive Helen Beurier as its first chief people officer, as it embarks on a talent drive ahead of its public listing.
Gradual P2P exit
Zopa’s exit from the P2P space has been rumoured for some time, as the company appeared to gradually distance itself from the sector.
In February, Zopa said it had paused IFISA new account openings.
More recently, in October, the platform said it was considering the strategic direction of its P2P operations.
This has led some industry stakeholders to say that they were not surprised by the news of Zopa’s P2P departure, although it represents the end of an era for the sector.