British lending platform Zopa aims to disrupt retail banking
Zopa, which was the world’s first peer-to-peer lender, intends to launch a “next-generation” bank. The British platform will apply for a banking licence, in order to offer overdraft alternatives to borrowers and FSCS-protected deposit accounts to savers. Zopa has already attracted individual and institutional investors to lend on their platform, and adding banking services to their offering will provide further diversified sources of funding for the company.
Following its pioneering activities in the peer-to-peer (P2P) lending sector, Zopa is applying for a UK banking licence.

If the UK’s financial services regulators approve Zopa as a bank, it will initially offer deposit accounts for savers and credit to borrowers.

Zopa was the first P2P lending platform. These platforms bring together people or organisations that want to lend money with those that want to borrow.

The tech platform quickly assesses the risk of loans and calculates fees, meaning borrowers can avoid the high interest rates of bank lending. It has generated £1.8bn in loans since it launched in 2005 and became profitable in September.

The banking licence application process, which is with the Prudential Regulation Authority and Financial Conduct Authority, is likely to take up to two years.

Jaidev Janardana, CEO at Zopa, said the decision follows the intention of regulatory authorities in the UK to encourage innovation, the adoption of new technologies and 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,” said Janardana.

“We have built a profitable, scalable and viable business, yet we’ve only just begun. We want to launch a next-generation bank to drive greater choice for borrowers, savers and investors, which is good for consumers and good for the economy,” he added.

If created, Zopa bank would become part of a growing revolution in retail banking where emerging challenger banks are investing in the latest financial technology (fintech) and are not held back by the burden of legacy technology.

Due to developments in consumer-friendly digital technology, including mobile apps, consumers today are more likely to shop around online for financial products rather than getting everything from full-service banks.