Zopa – the world’s first peer-to-peer lending platform launched in 2005 – has announced plans to become an online bank in order to challenge the traditional banking industry.
Zopa to launch online bank
Zopa, Britain’s biggest p2p lending marketplace has applied for a banking licence to launch a “next generation bank”. This planned bank will operate in parallel to its existing lending/borrowing business.
Zopa to launch online bank …it sounds crazy that a p2p lender is really aiming for it…but it makes sense.
By applying for a banking licence Zopa can offer its customers protection through the Financial Services Compensation Scheme, just like normal banks do on its customers current and savings accounts.
Zopa expects the licence approval to take up to two years.
When launched, the platform says it will offer term-deposit accounts for savers and revolving lines of credit for borrowers, although a spokesman admitted that they are still working out the full details of it.
By offering deposit accounts and overdrafts to its customers Zopa wants to use its extensive online lending experience to create a ‘next-generation’ bank that will challenge the current players in the financial markets.
P2P lending as the future of finance
Zopa CEO Jaidev Jardana announced:
“We launched in 2005 to create a richer life for everyone by making money simple and fair. We have lent over 1.8 billion GBP and inspired a 100 billion GBP global industry. We have built a profitable, scalable and viable business. Yet we’ve only just begun. We want to launch a next generation bank to drive greater choice for borrowers, savers and investors, which is good for consumers and good for the economy. We are uniquely placed to re-define customer expectations of what a bank should deliver in the 21st century. Over the last 11 years we have delivered great value to borrowers and investors whilst prudently managing credit risk. Combining our pioneering data and tech-led culture with an obsession with fairness and customer experience, we are best placed to shape the future of personal finance in the UK.”
New technology freeing the way to a banking license
New technology and freedom from banking regulation has meant that peer-to-peer lenders aim to offer better rates of interest to both savers and borrowers than conventional bank accounts.
The platforms (like Zopa, Mintos or Bondora to name a few) pair up savers, who want to lend their money, with small businesses or individuals who need a loans using modern web technology and match algorithms to beat the banks. The high interest rates an investor/lender can make goes hand in hand with a higher risk as the peer-to-peer lending market does not offer the protections of a bank, leaving customers exposed to potential losses. With a banking license Zopa aims to cover these risks by means of the Financial Services Compensation Scheme (FSCS).
Current low interest rates have pushed more savers to look at peer-to-peer as a way to generate returns on their savings. And with many platforms offering 10+% interest rates this makes loads of sense.
Lets hope Zopa manages to get their license so they can keep revolutionizing the financial system for the good of borrowers, lenders and the ordinary man.