Peer-to-peer lender Zopa gets full banking licence

Zopa has gained a full UK banking licence and is launching its bank alongside its peer-to-peer lending business, with its first product a savings account that can be set up in seven minutes.

The peer-to-peer lender gained a UK banking licence with restrictions in December 2018, but has now received a full licence. It also plans to launch a credit card this year.

Zopa established a peer-to-peer lending business in 2005 and has built up a large customer base. It had originally intended to launch a UK bank in November 2016 when it applied for a banking licence but, as with many tech startups, its plans changed to meet market demand.

Now is the right time, said Zopa CEO Jaidev Janardana. “Now, more than ever, the banking industry needs innovative, agile providers who work on behalf of customers,” he said. “At a time when people want great value, fair financial services products and simple, intuitive digital experience, Zopa offers consumers a compelling and credible alternative that they can trust.

“Securing our banking licence enables Zopa to play a wider role in the financial lives of our customers, as well as offering much-needed choice and competition to the wider market.”

All services will be available on the Zopa app, which was launched in 2018. It initially enabled borrowers to track loans, but Zopa decided the app would host all products and services going forward. Its services are delivered from the Amazon Web Services cloud.

Zopa decided to build the tech platforms for its banking products in-house because of its extensive internal tech talent with experience in building a peer-to-peer lending platform. It has about 500 staff, with some 100 working directly with technology, such as software developers and data scientists. Around one-third of its employees work at least partly with technology.

Didier Baclin, chief product officer at Zopa, who was previously an Amazon employee, is driving the tech project underpinning the bank. Last year, he told Computer Weekly that Zopa’s success in the peer-to-peer lending sector, where it has lent billions of pounds, is evidence that it can differentiate.

 Zopa is applying its tech knowhow and machine learning to give consumers services that are as easy to use as Netflix and Amazon.

“With things like Netflix, a lot of very complex things are going on in the background, but to the customer it looks very simple,” Baclin told Computer Weekly last year. “That is exactly what we are trying to do.”

In 2018, in preparation for the new bank, Zopa invested in building a team of developers, based in London and Barcelona. “From then until now, the teams have worked tirelessly to create systems that are purposely different from traditional banks,” it said in a statement.

The banking push comes at a time when many challenger banks and other fintechs have had to slow their development amid the Covid-19 pandemic. But those challenger banks that get through the crisis will benefit from the changes to people’s lifestyles that the coronavirus has triggered.

For example, there has been an increase in take-up of mobile banking as consumers avoided physical contact during lockdowns.