Published on July 4th, 2018 | by Jenny0
Zopa is back and it’s stronger than ever
Zopa is the UK’s oldest online peer-to-peer lending company, founded in 2004. The company was recently at risk but is now back in profit and stronger than ever.
So what is peer-to-peer lending? The service allows investors to lend to riskier borrowers for a high rate of return on their money.
In Zopa’s case, they saw a rise in high-risk borrowers but the investor returns were falling. This caused friction between lenders and borrowers as the risk increased and more and more borrowers were expected to fail in paying back their loans.
Originally the company paired low-risk borrowers with lenders so that there was an air of safety which came from a provision fund they had which would pay investors if a loan defaulted.
Last year, they reported a loss of £5 million on revenue of £33.2 million. The risks were simply too high, the interest rates rising, and some people simply just weren’t paying the loans back.
They had to shut out new applicants in March last year and only reopened in January for any new customers. During the lockdown period, they invested in technology and back office infrastructure to improve and scale up their lending process.
Fortunately, their efforts to save the business and keep it afloat worked because the profit of the firm for 2015 reached £1.5 million. They also reported that their revenue increased by 40% to £46.5 million. The amount of money paid out by lenders also increased to £985 million which is 43% more than the previous year.
The company puts their rebound of success down to their investments in their people, technology and infrastructure.
They also give credit to a technological innovation, which allows customers to see whether they’re legible for a loan only seconds after applying, for their successes.