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|Founded||United Kingdom (2004)|
|Founders||Giles Andrews, James Alexander, Richard Duvall, David Nicholson, Tim Parlett|
|Headquarters||London, England, UK|
Zopa is the world's oldest and Europe's largest peer-to-peer lending service having now lent over £2 billion. Zopa peer-to-peer lending works by bringing together individuals who have money to lend, and individuals who wish to borrow money. Instead of going through traditional banks, borrowers looking for low rate loans are matched with investors looking for better returns on their money.
The name, Zopa, stands for "zone of possible agreement", a negotiating term identifying the bounds within which agreement can be reached between two parties.
Founded in 2004 and launched to the public in 2005, likened to eBay and Betfair by the UK press, Zopa was one of the first companies in an emerging group of peer-to-peer services enabled by the internet. It was set up by a management team drawn from many of those that founded Egg in the UK. The company is based in London and backed by Bessemer Venture Partners, Augmentum Capital and Arrowgrass Capital Partners.
Zopa aims to solve a simple problem. The gap between the rate at which money is lent and borrowed is often very wide; people borrowing money are being charged high interest rates and those able to invest money receiving low interest returns. Zopa operates a technology platform which connects borrowers and investors directly and brings the rates of borrowing and investor return closer together. Zopa earns revenue by charging a small fee to undertake this activity.
Customers can be a "Investor",- lending money on the Zopa platform - a "Borrower" - taking a personal loan- or both.
Zopa operates only in the United Kingdom. It used to operate in the USA, and as a franchise in Italy, each under a slightly different model. However, the overseas operations have now closed.
Zopa Business Model
Zopa offers risk assessed personal loans to borrowers. A potential borrower is graded by risk using a variety of data sources including the credit reference agency Equifax. The current risk bands are A*, A, B, C, D and E. A risk band called Young was introduced in July 2008 specifically for borrowers aged between 20 and 25, who have not yet established a credit history  but was discontinued for new loans in mid-2012.
After initial online credit checking, borrowers also get full underwriting checks by humans and many applications are rejected by the very strict checks at this stage.
For borrowers the loans are flexible, allowing variation of monthly payments (providing it is above that of their usual repayment amount, which will always stand until the full repayment of the loan) and early repayments without penalty. Paying more in any given month decreases the amount of interest paid over the life of the loan and also allows the loan to be paid off more quickly. Indeed, many borrowers are able, and do, pay off their loans before the end of the loan.
As of July 2013 investors money is matched with borrowers only after the final underwriting is complete, to improve the matching process between available funds from investors and loans ready to be disbursed.
The Zopa platform will match money from investors who are prepared to offer their money to potential borrowers as a function of the risk and loan term, hence the name Zone of Possible Agreement Investors are matched to a variety of loan terms and risks to spread out risk and get an average return that is better than a savings account. Matching is done on a many-to-one basis, so that each borrower's loan is spread across many investors, thus reducing the effect of any defaults on each investor. Currently, an investor can choose how much they wish to lend to any one particular borrower, in multiples of £10, with £10 being the minimum they can lend to any one borrower. Video explanation
For investors, their money is committed for the duration of the loan, though early exit is possible in certain circumstances using a system known as 'Rapid Return' to transfer loans to other investors. As well, borrowers repay investors monthly, so the investor's full investment in Zopa begins receiving monthly repayments as soon as loans are formed. Investors can choose to 'recycle' repayments into other loans as they are formed, or keep the money in a holding account. To maximize returns, many investors choose to recycle their monthly repayments. For Rapid Returns, investors can only choose this option on loans which have not had any late payments by the borrower. The investor who takes on a rapid return loan gets the interest rate which is already on the loan; therefore by accepting rapid return loans, a investor can get higher rates than they are offering.
Since the launch of Safeguard in May 2013, bad debt risks for investors in Safeguarded products have been mitigated. If a borrower defaults, the debt is normally sold to a debt collection agency. Approved Zopa loan customers currently have better credit profiles than the UK average. Zopa publishes bad debt forecasts as well as actual outcomes, which reveal that outcomes are generally better than forecast. Between 2010 and 2013, the default rate was lower than 0.30%. However, loans issued in 2008 (a time of economic crisis) experienced bad debt at almost double the forecast rate. Zopa publishes its full loan book and default rates on their website
In May 2013, Zopa launched its Safeguard fund and Safeguard lending option, which steps in to pay out investors in the event that a borrower defaults on their loan. If the borrower misses a repayment for four consecutive months, this is classed as default. Zopa will continue to administrate the loan but if the loans are covered by Safeguard, a claim is made for the outstanding loan amount. Safeguard will usually pay the claim but does reserve the right not to, and in this case Zopa will seek to recover the amounts owed on the investors behalf.
Safeguard’s ability to pay out relies on having sufficient funds in Safeguard. The amount of money in the Safeguard Trust is based on the estimated default rate for each borrower in a similar economic environment, and an assessment of whether there is enough money in the fund to make estimated pay-outs. Since Safeguard's launch all claims on loans covered have been paid, although there is no guarantee this will always be the case.
investors are given a basket of loans across Zopa's credit markets which make up an average rate known as tracker rates, rather than allowing the investor to choose the rate and risk class at which they wish to lend. This automates lending in order to make it simple and fair. This is in contrast to similar peer-to-peer lending schemes that let users set their own rates. Zopa's Safeguard fund now has over £12 million in it to pay out to investors in the event of a default
Zopa has won a number of awards since launch covering their loans products, investment products and business approach.
- Sunday Times Hiscox Tech Track 100: Rank 36th 2016 (41st 2015, 79th 2014) 
- Lloyds National Business Awards: Shortlisted 2016: Amazon Digital Business of the Year
- FS Tech Awards; Winner 2016: FinTech Deal of the Year
- Growing Business Awards: Winner 2015: Growing Business of the Year (Smaller Company)
- The Deloitte Technology Fast 50: Ranked 35th in 2015
- AltFi Awards: Winner 2015: P2P Consumer Platform of the Year
- AltFi Awards: Winner 2015: People's Choice
Loan Product Awards
- Money Supermarket Supers award; Loan Provider of the year; Winner 2016 
- Consumer Moneyfacts Awards: Personal Loan Provider of the year; Winner 2016 
- Moneyfacts Awards: Best Personal Loan Provider; Winner 2016
- Moneywise: Most Trusted Loan Provider; Winner 2016 
- FinTech Excellence Awards: Winner 2016: Best Personal Loan Provider 
Investment Product Awards
- Moneywise Customer Service Awards Winner 2016: Most Trusted P2P Platform
- MoneyWeek Readers' Choice Awards; Winner 2014: Best P2P Lender
- Your Money Awards Winner 2014: Best Peer to Peer Provider
In August 2011 Zopa joined with Funding Circle and Ratesetter to launch the Peer 2 Peer Finance Association to act as a trade body for the UK's peer-to-peer financial industry with Giles Andrews, Zopa CERO as inaugural chairman.
In December 2012 Jacob Rothschild invested in the company through Augmentum Capital, the UK Government declared they would become a investor of money to sole traders through the platform and that it would be regulated by the successor to the FSA. Bank of England Director, Andy Haldane, stated that peer-to-peer investors could challenge the banks.
On 26 Oct 2016, the debut securitisation for Zopa loans was priced. It was Europe’s first securitisation backed by unsecured consumer loans from an online platform
United States (Historical Operations)
Zopa launched in the US in partnership with six Credit Unions on December 4, 2007 but it closed to new business on October 8, 2008 due to Zopa's concern that the bad debt rates of new borrowers could potentially rise beyond acceptable levels as the economic situation deteriorated in the US.
The US model was significantly different from that elsewhere due to regulatory restrictions. Customers could be "Investors" or "Borrowers".
Borrowers could obtain a loan via Zopa from one of the Credit Unions. Borrowers would then post a profile on Zopa giving some details about themselves.
Investors bought a Zopa Certificate of Deposit. Investors were able to help borrowers by offering them a slice of the return on their CD, reducing the amount of interest the borrower had to pay. If enough investors helped a single borrower then all of their repayments could be covered.
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