If you’ve shopped around for a personal loan in recent years, there’s every chance you’ve looked beyond long-standing sources of lending for a more competitive offer, even in these days of historically low interest rates. Among these new options, peer-to-peer (P2P) lending has developed into a popular and attractive choice for securing funds.
Such services began life in the UK, when Zopa became the first-ever peer-to-peer lending company, launched by a team from internet banking company Egg in March 2005. In January 2017, Zopa became the first UK-based P2P company to lend more than £2 billion in loans.
Now, the company is set to launch its own banking offshoot, expanding the range of financial products it offers to UK consumers and promising to “create a set of products that customers can feel good about, with no catches on rates or charges, no hassle to use or understand and which cater to the needs of new and existing customers in a fast-changing market”.
So how will this new bank challenge the traditional players in the market? We asked Zopa’s Chief Customer Officer, Clare Gambardella, to tell us more.
Peer-to-peer lending pioneer Zopa recently announced plans to build on its success by launching its own digital bank, joining the increasing ranks of challengers to the established banking heavyweights.
What initiated the development of Zopa’s new bank?
Over the past 13 years, we’ve built a profitable, scalable and viable business that has lent out over £3.5 billion worth of personal loans to UK consumers. In that time we’ve built up an excellent track record in prudently managing risk and seamlessly originating high-quality loans online. In 2017 alone, we lent nearly a billion pounds to low-risk UK customers by offering a better-value product and a better experience – an ethos we’ve lived by since 2005. Having globally pioneered the P2P lending model, we wanted to extend our product offering in order to meet the financial needs of even more people in the UK. Launching a bank allows us to do this and is a natural route to our goal of making Zopa the best place for money.
What services and facilities will the new bank provide?
At launch, we plan on offering FSCS [Financial Services Compensation Scheme]- protected savings accounts for savers and credit cards for people looking to borrow. These will sit alongside out current product portfolio of P2P investments, including IFISAs [Innovative Finance Individual Savings Accounts] for investors, personal loans and car finance. As the Open Banking initiative rightfully puts customer data back into the hands of customers, we will also offer consumers a more personalised approach to money management.
What will Zopa’s bank offer that current banks cannot? How will it compare to other digital banks?
In recent years, technology has redefined what customers have come to expect from their banks. Rising consumer expectations have meant that many existing retail banks have found it hard to keep up. At Zopa, we believe we can offer better customer service, fairer products and a forward-looking approach that changes and evolves with our customers.
It’s great that other digital banks are improving choice for customers and challenging the way the industry operates. We combine the agility of these players with a strong track record, existing scale and a proven business model.
Will this be a challenger bank, or in partnership with an existing bank?
We will remain independent of other banks. Our banking business will sit alongside our existing P2P business.
In what areas does Zopa hope to improve in the digital banking sector and the P2P industry?
Zopa’s aim is to improve how customers feel about their finances, reducing stress and anxiety, being transparent and clear, and providing service as they want it.
We want to provide people with better control over their finances, in particular through our money management app and Open Banking, which will give customers more choice over how they manage their money.