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Platform Analysis: Zopa

Key Information

Founded:
August 2004
Company No:
05197592
FCA Permission:
Fully Authorised
FCA Number:
718925

Account Details

Account Types:
General Investment Account (GIA) and Innovative Finance ISA (IFISA)
IFISA Status:
Available
Investment Structure/Bid Type:
Autobid
Loan Type:
Consumer

Product Name

Core

Invest in loans across the Zopa Core risk markets.
A 1% fee applies when selling loans.

Product Details

Term:
Ongoing
Min Investment:
£1,000
Max Investment:
No Max
Advertised Rate:
3.7%

Product Name

Plus

Invest in higher risk markets for a higher return.
A 1% fee applies when selling loans.

Product Details

Term:
Ongoing
Min Investment:
£1,000
Max Investment:
No Max
Advertised Rate:
4.5%

Actual Net Returns v Estimated

Actual Default v Estimated Bad Debt v Actual Bad Debt

Amount Lent & AUM

Weighted Borrower Rate

Year Min Borrower Rate Average Borrower Rate Max Borrower Rate
2005 4.40% 6.10% 14.00%
2006 3.90% 5.71% 13.40%
2007 4.30% 7.30% 14.33%
2008 4.85% 9.51% 18.53%
2009 5.01% 8.73% 18.20%
2010 1.00% 8.74% 15.19%
2011 1.00% 7.19% 13.32%
2012 5.12% 6.90% 12.09%
2013 3.50% 5.62% 13.90%
2014 2.00% 5.80% 25.70%
2015 2.14% 7.83% 24.75%
2016 2.49% 8.56% 31.03%
2017 2.42% 8.62% 31.62%

Weighted Loan Amount

Year Min Loan Amount Average Loan Amount Max Loan Amount
2005 £500.00 £3,645.11 £14,500.00
2006 £1,000.00 £4,306.80 £15,080.00
2007 £1,000.00 £3,896.15 £18,280.00
2008 £1,010.00 £4,853.98 £15,100.00
2009 £1,100.00 £5,607.46 £15,120.00
2010 £1,120.00 £4,988.68 £15,130.00
2011 £1,100.00 £4,849.59 £15,190.00
2012 £1,100.00 £4,989.13 £15,190.00
2013 £1,040.00 £5,560.45 £21,550.00
2014 £1,010.00 £7,249.44 £29,640.00
2015 £1,000.00 £7,302.38 £29,640.00
2016 £260.00 £6,918.76 £29,990.00
2017 £260.00 £7,180.30 £29,970.00

Financial Summary

31st December 2016 31st December 2015
Revenue £33,220,454 £20,640,429
Loss -£5,816,548 -£8,854,703
Net Assets £11,696,184 £13,597,122
Cash Position £9,801,290 £13,559,339

Although the group is not operating in profit, the company experienced a 61% uplift in revenue in 2016, reflective of a 30% increase in loan origination.

Overview

Zopa, founded in 2005, was the first peer to peer lending platform not just in the UK, but globally. The platform connects investors with consumers seeking personal loans to purchase cars, consolidate debt or to fund home renovations. Zopa has facilitated more personal loans than any other UK P2P provider.

Risk and Security

The principal risk is a large number of borrowers default on their loans. This may be a result of stressed economic conditions or Zopa’s credit sanctioning. Zopa protects investors through its credit checking processes and diversification. For investors pre-autumn 2017, Zopa maintained a provision fund, known as ‘Safeguard’, to cover losses. However, this has been stopped for new investments. Zopa splits investors’ capital into a minimum of £10 chucks and spreads funds across a large number of borrowers. Zopa limits exposure to each borrower to 1%. Despite not in operation for new investors, Zopa still monitors the coverage of their Safeguard fund to track its ability to pay out when a loan defaults. The Safeguard is not a guarantee.

Recovery Process

If a payment fails, a Zopa representative will call the borrower and usually clear the arrears within a few days of the missed payment. If a borrower fails to pay after 30 days, Zopa may involve a debt collection agency. After 45 days, the loan is considered to be in default and P2PS Ltd, a subsidiary of Zopa who manages the Safeguard fund, takes ownership of the loan. In some instances, legal action may be taken.

Withdrawing Funds

Investors can access their funds early by selling active loans to other investors on the secondary market. As there is often a high demand for borrowers on the Zopa platform, investors can often receive their funds back quickly. Investors will incur a 1% fee for selling loan commitments.

Platform Failure

If Zopa was to go out of business, the platform intends on using loan servicing fees to cover the ongoing costs of managing the loan book. Loan contracts between investors and borrowers are direct, so if Zopa was to become insolvent, these contracts would still exist.