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Zopa announces plans to join the banking market

Earlier this week we wrote about the increasingly crowding UK banking space. One of the latest brands to announce that it is joining the market is peer-to-peer lender Zopa, who shared the news in a press release on 16 November.

Over the past year, Zopa has lent over £650 million – and, since its launch 11 year ago, the total amount lent is close to £2 billion.

In 2016 alone, they’ve received acknowledgement at six different award ceremonies. The main categories were ‘most trusted loans provider’ from Moneywise Customer Service Awards (won six years in a row) and ‘best personal loan provider’ from MoneySuperMarket Supers Awards 2016.

Now, it’s looking to set up a ‘Next Generation’ bank to complement its current services with overdraft alternatives and FSCS protected deposit accounts, though it’s not yet entirely clear what these products will look like.

Undoubtedly, they will be joining an already busy marketplace, competing with the likes of Monzo, Atom and Starling to name a few.

But Jaidev Janardana, the CEO of Zopa, thinks that they are uniquely placed to redefine the expectations of their investing and borrowing customers: ‘We launched in 2005 to create a richer life for everyone by making money simple and fair. We have lent over £1.8bn and inspired a £100bn 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.’

In recent times, we’ve seen peer-to-peer lenders, such as Funding Circle, forming partnerships with banks whereby they’ll be recommended as an alternative to declined bank loan applicants.

Interestingly, Zopa has decided to take a different approach. It has entered into what they call a ‘partnership’ with Metro Bank, but at a closer look it’s unlike other partnerships in the alternative lending market. Instead of referring declined loan applicants to the P2P lender, the bank is lending its funds through Zopa’s platform – essentially becoming a P2P investor – benefitting from all the same interest rates as individual investors.

Zopa's investments options

Though both parties refer to it as a partnership, one could argue that it is more reminiscent of a traditional consumer-supplier relationship. Then again, it would make sense for Zopa to avoid getting too involved in a partnership if it wants to compete in the banking marketplace.

Janardana states, ‘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.’

It will be interesting to see how Zopa not only competes with established banks, but also how it will compete with other challengers.

Want to know more about Zopa, P2P lending or challenger banks? Mapa tailors research to meet your specific needs as part of our Bespoke Consultancy service. For more information, please get in contact with us

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