Zopa to focus on banking after closing peer-to-peer lending

Fintech pioneer Zopa is ending its peer-to-peer (P2P) lending business to focus on its banking service.

The fintech unicorn was an early success story with its peer-to-peer lending model after it launched in 2005, but due to a loss of trust in the fintech segment and increasing costs, it will now focus on its bank, which was launched last year.

Natasha Wear, peer-to-peer CEO at Zopa, wrote in an email to customers that after 16 years in the P2P business, that part of the company will now close.

“To support this, Zopa Bank will be buying your entire loan portfolio at current face value without any of the fees you’d normally pay for a loan sale,” she added in the email.

The email cited a loss of trust in peer-to-peer lending as a contributing factor, as well as increased costs resulting from regulatory changes.

“Sadly, over the past few years, customer trust in P2P investing has been damaged by a small number of businesses whose approach led to material losses for customers investing in those platforms,” wrote Wear. “Linked to this, the changing regulation in the sector has made it challenging to grow and remain commercially viable.”

The P2P business closed today, 7 December 2021.

Zopa recently became a UK fintech unicorn following a funding round worth $330m (£220m), putting its value at more than $1bn. When the funding was announced, the company said it would use it to fuel growth in its digital bank.

In its first 12 months, Zopa Bank concentrated on the savings market, offering an account that can be set up in seven minutes. All of its banking services are available on the Zopa app, which was launched in 2018.

Simplifying banking has been a key mission for Zopa. Speaking to Computer Weekly last year, when the bank was launched, the then chief product officer, Didier Baclin, said the company was applying its tech knowhow and machine learning to provide consumers with banking services that are as easy to use as Netflix and Amazon.

Having a large part of its technology operation and infrastructure already in place through the P2P lending businesses negated much of the initial cost associated with setting up a digital bank.

Zopa decided to build the tech platform 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, around 100 of whom work directly with technology, such as software developers and data scientists. Around one-third of its employees work at least partly with technology.

In 2018, in preparation for the new bank, Zopa invested in building a team of developers based in London and Barcelona.