OBE for Zopa co-founder as respect for P2P lending grows

This year's New Year honours list saw "alternative financiers” nominated for gongs rather than traditional bankers. Among them was Giles Andrews, co-founder of Zopa, which has so far overseen £1.2bn worth of lending to individuals since it was founded ten years ago, and is “a core part of the revolution transforming the way we borrow.” According to Andrews, ‘It’s a very exciting start to the New Year (the OBE)…There’s been quite a lot in the news about the fact no banker won an award in the New Year honours list. It’s because banks don’t treat customers very well. I think anyone who knew anything about the industry knew that was true even before the crisis.’ The OBE for Andrews, and a CBE for Samir Desai of Funding Circle, are being seen as “a clear sign that the highest authorities are willing to give the nascent sector their blessing.”

Once upon a time the New Year honours saw a slew of bankers collecting gongs. These days things are different – in 2016 it is the so-called ‘alternative financiers’ who seem to have been the winners.

Among them is Giles Andrews (now OBE), co-founder and executive chairman of Zopa. The pioneering group has overseen £1.2billion worth of lending to individuals and is a core part of the revolution transforming the way we borrow.

‘It’s a very exciting start to the New Year, he says of his OBE. ‘There’s been quite a lot in the news about the fact no banker won an award in the New Year honours list. It’s because banks don’t treat customers very well. I think anyone who knew anything about the industry knew that was true even before the crisis.’

In the jeans: Giles Andrews, boss of Zopa, which has lent £1.2billion

So it seems banker bashing is still in vogue at Zopa.

‘2015 was a really exciting year for us,’ Andrews continues. ‘We doubled the size of our business and it grew faster than any other mature platform in the UK. And the plan is to do the same again next year.

‘So we’re setting ourselves an ambitious target of doubling ourselves again, which means we will lend over a billion pounds. We’ve lent about £1.2billion in total now, of which £530million or so has been in the last 12 months.’

Zopa, which now has almost a quarter of a million customers, was founded in 2005, but Andrews was part of a small team that planned the project over the previous two years. Its premise was simple. Find people with spare cash and put them together with people who want to borrow – cutting out the banks.

‘I thought it was a brilliant idea. I’ve always felt that financial services didn’t offer consumers a great deal. Banks were really looking out for themselves and not for their customers. From the outside you could tell that things like PPI were being mis-sold even then.’

But cutting the banks out of the loans process was an extraordinary idea in 2005. Then came the crisis, a collapse in trust in banks and the credit crunch. Savers were hit by low returns and many would-be borrowers couldn’t get a loan at all.

It was the perfect opportunity for Zopa and other peer-to-peer lenders, as they are known.

Peer-to-peer lending: Zopa's first TV advert

Zopa spreads loans from lenders across a range of borrowers to spread the risk. It carries out its own checks on credit worthiness and claims to have the lowest default rate of any similar lender. It also runs a system called Safeguard, which is a fund that can pay out to lenders if a borrower defaults. It offers personal loans ranging between 3.9 per cent and just over 7 per cent.

Lenders earn between 3.8 per cent and 5 per cent. Such lending is expected to benefit further from the new pension freedoms. Zopa’s research of its users found last year that two-thirds of its older customers would rather invest through peer-to-peer lending than buy an annuity. But there are serious concerns in some quarters that alternative finance will create its own scandals.

Last week it emerged that small company Crumpet Cashmere, whose jumpers have been bought by celebrities including Alexa Chung and Elle Macpherson, had gone bust – only for its assets to be bought back by the management.

The sting in the tail was that private investors, who had invested through alternative funding platform Crowdcube, stand to lose more than £100,000. While Zopa has a different model from Crowdcube, they are both part of the booming alternative finance market.

Body blow: Elle Macpherson was a fan of Crumpet Cashmere

Fears that small investors could lose out in these schemes are ever present and there are regular calls for tighter regulation.

Andrews claims not to be too worried. ‘I’m not overly concerned about the regulation. If we continue to offer consumers a good deal, I think regulators will be happy to leave us alone. It’s a very important part of our plans to continue to do a great job. I can’t speak for everybody.’

He quickly adds: ‘I don’t want to make that sound melodramatic or suggest there is a problem.’

The OBE for Andrews – and a CBE awarded to Samir Desai, co-founder of alternative business lender Funding Circle – are a clear sign that the highest authorities are willing to give the nascent sector their blessing.

‘It is one of those things that everyone now thinks is a great idea ten years after the event,’ says Andrews. ‘But these things always take a long time, especially when your business involves building trust with consumers and asking them to do some-thing completely different to what they’ve ever done before.

‘Being first is not always the easiest, because you’ve got to educate consumers all by yourself. So actually the emergence of other people coming into the sector has probably given us credibility as well. I think we’ve continued to demonstrate that we run a brilliant business and the trust we’ve built with consumers is based on a mixture of our risk management and transparency.’

The big event for Andrews this year could be a real coming of age for Zopa as the company is considering a stock market flotation with an initial public offering (IPO) of shares. One reason for this says Andrews is to create a ‘liquidity event for our early shareholders’. This is City jargon for cashing in shares and would include Andrews himself.

‘I think the most natural route, although it would involve an enormous amount of hard work, would be to IPO the business. We don’t have a firm plan as to when, but I think that’s a natural thing to work towards. And in working towards it, it will impose disciplines on the business that will be part of the growing up of peer-to-peer.’

Zopa has said nothing about how much it might raise from an IPO. Some reports have suggested it could sell a small stake for about £70 million, valuing the whole business at £500 million.

Andrews, 49, who has a young family – a ten-year-old and an eight-year-old – says he tries to escape London ‘as often as I can’, often to the South Coast, where he celebrated his OBE and the New Year.He says: ‘I consider the Isle of Wight my spiritual home. I find that a real sort of tonic compared with London.’

Prior to joining Zopa, Andrews had worked in the automotive industry, including setting up Caverdale in 1992 – a motor retailer which was renamed Godfrey Davis Motor Group and sold in 1997. He also set up a consultancy business with clients including Tesco Personal Finance.

‘I’ve been either self-employed or involved in starting businesses for most of my career. Start-ups are really exciting, they’re all-consuming. They always take much longer than anyone thinks and a lot of them don’t work. But it’s a very satisfying way to earn a living.’

Particularly, perhaps, if you can get one over the banks.