Zopa's Ticket to Ride
Posted by William on November 28th, 2007
It’s not the Beatles at Shea. Eventually, it could be bigger.
Zopa launched in limited release today in the US with a wider launch next week. Sure, the peer-to-peer lending site Prosper is already a player in the US market, strumming its own eBay-inspired, populace-driven power-ballads out for nearly two years. Zopa’s British Invasion brings a slightly different model to these shores.
Borrowers can apply for a five-year loan, with interest rates ranging from 8.75% to 16.99%, depending on their credit profiles. If approved, borrowers can get their funds immediately. From there, they can create profiles to explain their reasons for borrowing and can promote their profiles on the Zopa Web site, their own blog or other social-networking sites to appeal to friends, family and others willing to help them with their loans.”
Wall Street Journal, November 28, 2007
Six credit unions, including Forum Credit Union, will be matching the Zopa lenders and borrowers. In addition to P2P lending, US lenders can purchase Zopa-branded CDs to mitigate risk, an option not available to Prosper. Borrowers secure loans from this capital. It’s a familiar three chords, no?
It combines social media in a way Prosper hasn’t. It mitigates risk for lenders. It’s working through the CU movement. The Beatles borrowed from Elvis and Buddy Holly, and Zopa is innovating in its niche as well.
Of course, we’ve been listening to bootlegs and waiting for it to launch in these shores for over a year. Our fearless leader Matt provided some numbers in his September 2006 post. Netbanker.com says it could be a $9 billion market by 2017.
Keep in mind, too, that Zopa’s cost structure is significantly lower than banks and CUs, which has led Zopa to compare itself favorably with its US partners. Working with credit unions as a point of entry is a good strategic move for both Zopa, who gets regulatory assistance and the credit unions, who align themselves with a potentially industry-changing technology.
This invasion may not have the screaming teenagers or Ed Sullivan, but it is causing a small but significant uproar.
Doug,
Nice post – I especially appreciate the Beatles spin, since I was in about 7th grade when the Beatles exploded on the scene.
So forgive me when I say that I hope that peer-to-peer lending acts more like the Rolling Stones; a little bit brash, a little bit unconventional, and wildly successful for decades. (They don’t call them the World’s Greatest Rock ‘N Roll Band for nothing.)
Hey Doug,
Jonathan from Addison Avenue CU here (one of the 6 Zopa partner CUs). We were all kind of hoping things would turn our more Britney Spears than anything. A loyal fan base no matter what happens LOL. Nah, maybe we can stick with the Beatles.
Doug -
Thanks for the update! It will be interesting to see how the rollout progresses.
Doug,
I think ZOPA will be a classic like Frank Sinatra. He can sing, he can act, he can visit the White House and drink like a fish and everyone respects him (or is afraid of him).
Cheers!
Seriously – you guys are amazing. It’s the next generation CU starting up! This is exciting.
I have a front row seat and plan to scream my head off!!
I hope ZOPA is a bit like Sweet Baby James…Taylor; a singer with a wide range of appeal to many age groups and demographics.
I’ve been heralding ZOPA’s “advent” for a couple of years now in every public presentation I give.
It will be fun to follow and report on the “rest of the story” as it develops.
Very glad to see the CU movement linked to this sort of relevant innovation.
Keep creating, Mike
Grateful Dead. Hugely loyal fan (customer) base, an always superb customer experience, and always doing what’s right for the customer, and not just its own bottom line.
And they were around for decades (and are still going if you count what Phil Lesh and Bob Weir are still doing). :)
Yesterday I could view Zopa’s homepage without creating an account… Today I have to? Are you kidding? This HAS to be a bug.
I’ll be back later…
Still awaiting more details, and certainly innovative.
My question remains to what extent this is P2P. I gather its limited to the extent that friends and family can reduce borrowers interest rates, by giving up their interest. But the spread between loans and CD’s remains,
I thought that it was spread elimination that would set P2P apart.
The Zopa model is P2P, but the US CD model mitigates risk for the lender – something that Prosper does not do.
I think it’s a good strategy to make investing in it more palatable. even if it isn’t a pure P2P model.