17 November, 2016

Zopa to Launch Challenger Bank

Zopa to Launch Challenger Bank

Yesterday, Zopa announced something unprecedented in the peer-to-peer lending industry. The P2P giant revealed it will be applying for a banking license.

The world’s first P2P platform has made a landmark move by announcing its intention to launch a bank to ‘enhance their market-leading peer-to-peer business’ according to Zopa’s press release.

Despite operating under interim permissions at present – as many of Zopa’s peers are doing – the UK’s largest P2P platform, having lent £1.8bn to-date, is still moving ahead with its banking licence application, which is to be submitted to the FCA and the Prudential Regulation Authority (PRA).

Awaiting full authorisation from the FCA has been a slow process for major, mainstream P2P lenders, preventing the likes of Zopa from offering the Innovative Finance ISA to its customers. A banking licence may, therefore, seem ambitious.

But, Zopa’s CEO Jaidev Janardana is not fazed by the regulatory framework in the UK and rather sees it as a vehicle to thrive:

“The regulatory authorities in the UK have created an environment that encourages innovation, the adoption of new technologies and an increase in competition in the banking sector. Zopa has a history of creating innovative retail-facing financial services, driving consumer choice and transparency. We are responding to the positive regulatory environment and building on our experience to bring yet more choice to the market.”

Zopa’s not launching a bank in the traditional sense. This will be an online only service, with no branches. Furthermore, the launch of Zopa’s next generation bank will ‘extend the company’s existing suite of investor and borrower products by offering FSCS protected deposit accounts to savers and overdraft alternatives to borrowers.’ In an effort to retain a competitive edge as well as provide increased value, Zopa is positioning itself to remain at the forefront of P2P lending:

“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.”

Incumbent banks will be watching closely, wondering if P2P, a model in which the platform bears no credit risk, has the capacity to evolve and edge even close on to their turf.