| 
  • If you are citizen of an European Union member nation, you may not use this service unless you are at least 16 years old.

  • You already know Dokkio is an AI-powered assistant to organize & manage your digital files & messages. Very soon, Dokkio will support Outlook as well as One Drive. Check it out today!

View
 

Zopa

Page history last edited by Brian D Butler 15 years, 1 month ago

 


 

Zopa

 

peer-to-peer lending

 

 

Summary

Zopa is a UK-based company providing an online money exchange, allowing people who have money to lend it directly to people wanting to borrow; without the need to go through banks, a process sometimes referred to as peer-to-peer lending.

 

Extends credit to a group, who may have irregular incomes or short-term cash-flow requirements, but who may not be offered credit through traditional methods of credit referencing.

 

• British Zopa, the person-to-person money marketplace that we've featured in the past, is extending its geographical reach. While Zopa announced expansion to the US a while back and is operating a San Francisco office to prepare their stateside launch, a new country is being added to the roster via a different route.  (see update below)

 

• In Italy, Zopa's technology and brand have been licensed to a local start-up. Milan-based P2P s.r.l. is currently recruiting (tech) team members and hasn't yet announced a Zopa.it launch date, pending accreditation from the Italian banking authorities. The Italian franchise is headed up by Maurizio Pietro Sella, a former Citibank executive.

 

• Hey — franchising works well enough in the brick-and-mortar world, so it's about time we see more of it online. It makes sense, especially when complex processes and strong branding are involved, speeding up international roll-out without the main entity having to shoulder the full costs. As for Zopa: US, UK and Italy down — that leaves dozens of ripe markets to go!

 

 

 

 

More about Zopa...

 

Zopa , based in London, is a lending network. Zopa syndicates loans requested by “borrower” members out to “lender” members, based on criteria and parameters set by both parties.

 

Zopa stands for “Zone of Possible Agreement”, which “is the overlap between one person's bottom line (the lowest they are prepared to get for something) and another persons top line (the most they're prepared to give for something). It's the way people negotiate all sorts of stuff - buying a car, getting a mortgage - even a teenager negotiating with parents about staying out late. If there's no Zopa, there's no deal.”

 

Zopa is the first lending and borrowing exchange. What we do is very simple. We put people who want to lend in touch with credit-worthy people who want to borrow. And because there’s no middle-man - the borrower pays just a 1% exchange fee to Zopa upfront - both benefit.

We’re not sure about the “no middle-man” argument since Zopa is, in effect, acting as a middle-man and taking a 1% cut, but the idea is brilliant nonetheless, and it certainly seems to make it easier for people to borrow small amounts of money at reasonable rates.

 

 

 

 

How it works

 

The service matches people that want to offer to lend money with people that need to borrow money. Matching is done on a many-to-one basis, such that no one lender is exposed to any single borrower. Bad debt risk is taken by the lender, and priced into the rate offered to borrowers, although debt recovery processes are available.

 

When someone applies to Zopa for a loan, the company's proprietary IT system carries out real-time authentication checks and accesses credit reporting data from Equifax. The customer is then put into one of four risk bands: A*, A, B or C.

 

Similar to eBay and Betfair in the UK press, Zopa is an addition to the emerging group of peer-to-peer services enabled by the internet. Prosper is a similar service based in the U.S.

 

Launched in 2005, Zopa is led by a management team that comprises many of those that founded Egg in the UK. The company is based in London and backed by Benchmark Capital and Wellington Partners.

 

Fees

Both borrowers and lenders are charged a 0.5% fee by Zopa on the funds for each transaction.

 

 

 

 

 

Borrowers and Lenders

 

In order to lend or borrow, Zopa does a background and credit check on you to ensure that you are appropriate for their market. They attempt to do this online and with as little hassle to you as possible. Once you are approved you can lend or borrow money within various limits.

For instance, you may borrow from £1000 to £15000, in £500 increments. Lenders can loan a minimum of £500 and a maximum of £25,000. If you’d like to lend more than £25,000, you must obtain a license to become a “consumer lending business”. Zopa will help you through this process.

 

Zopa spreads the lending risk among many borrows to reduce overall loss risk. Contracts are set at £10 each and must be spread among at least 50 different borrowers. And Zopa aggresively pursues bad debts:

 

 

How does Zopa deal with bad debts?

If one of your borrowers defaults, Credit Resource Solutions Ltd, a collections agency, will undertake to recover any money outstanding. Should it be unable to do so after 120 days, you agree to sell the debt to a collections agency for a price that will be agreed at the time, but which will not be less than 10% of the amount then outstanding. The agency will pay a fixed percentage of the outstanding amount to us which we will pass back to you. We will not allow that borrower to borrow again and will suspend their membership. Furthermore, we will pass their details back to our credit referencing agency which may affect their ability to get credit in the future.

 

Zopa claims 16,000 registered members. Currently, Zopa is only open to U.K. residents who are more than 18 years old and have a bank account and personal Equifax credit rating. Additional information is available at their Help site. The Zopa team (quite a long list) can be viewed here

 

 

 

 

Two and a half years ago, Zopa launched its social finance concept in the UK. Yesterday, they finally went live in the US. While the basic principle is the same—consumers lend to other people instead of banks, and both parties win—Zopa US deviates from the path taken by its British sibling.

 

While Zopa UK uses a number of methods to keep lenders' money safe—extensive profiles include a potential borrower's credit rating; risk is diversified by spreading money across a number of borrowers; Zopa works with a collection—Zopa US takes security a step further by federally insuring all funds through credit unions.

 

Instead of lending directly to borrowers, lenders buy a Zopa CD (certificate of deposit). To buy a Zopa CD or borrow a Zopa Loan, members need to be a member of one of Zopa's partner credit unions. If they're not already a member, they can sign up online. After buying a Zopa CD, the member must pick at least one borrower to help. And this is where it gets interesting: by choosing the rate at which he or she 'helps' a borrower, the lender controls how much lower a borrower's monthly payments will be. APY for a CD is currently at 5.10%, with APR for the borrower ranging from 8.75% to 16.99%, depending on credit history. Feeling philanthropic? Set a lower rate for the borrower. More of a Scrooge? Keep a larger portion of the spread to yourself.

 

This system not only sets it apart from Zopa UK, but also from the company's main US competitor: Prosper. Both Zopa UK and Propser let their internal markett of borrowers and lenders determine the going rates, and neither offers the security of a guaranteed loan. The safer route provided by Zopa US could help it tap into the very social market of loans between family and friends: the same audience that CircleLending focused on (now Virgin Money US).

 

According to Online Banking Report, a research firm, roughly USD 100 million in new person-to-person loans will be issued this year, mostly by Prosper, with new P2P loans expected to jump to as much as USD 1 billion in 2010 and USD 9 billion in 2017 (source: Wall Street Journal). Which makes it a very interesting market to watch, or to join if you're in financial services. (Related: Zopa's launch in Italy and Peer-to-peer lending for 1.3 billion peers.)

Website: us.zopa.com

 

 

 

 

External links

 

 

Comments (0)

You don't have permission to comment on this page.