Zopa have announced that they are not accepting new money transfers into the platform. An email was sent to all lenders this morning stating that due to current volumes of new money, combined with an expected seasonal fall in borrower demand, there will be a platform limit for new money.
With classic peer-to-peer lending, as supply remains constant and demand falls off, lending and borrowing rates would normally fall, and Zopa has reduced rates several times over the last few months. Zopa has taken the decision to also reduce the supply by preventing new money from entering the platform. Existing money from borrower repayments would be unaffected, and would continue to be relent as previously.
The email sent to lenders is as follows:
We always aim to lend your money out in a reasonable time. However, with current volumes of new money transfers combined with demands for loans seasonally declining in December, we don’t expect this to be achievable this month.
We are committed to the risk and underwriting strategies that have served us well for more than 11 years and will not compromise our high standard of borrower to increase loan disbursals. This has led us to introduce a platform limit for new money into the platform so we can aim to lend out your money in an acceptable time.
What does this mean for you?
Throughout December, we will monitor the levels of new money. When necessary, we'll stop all inbound transfers while we disburse the new funds already in the queue.
Currently, the time to lend new money is projected to be slow, so we are not accepting new money transfers. You can check your Weekly Update email and live tracker in My Zopa for the latest information. We recommend you log in to My Zopa and check the tracker before making a transfer.
Money you have already lent out and set to relend will continue as before, keeping your existing money earning. This limit only affects new money into the platform: not your repayments and funds in your holding account.
What happens if I transfer money when the limit is in place?
We'll return your most recent transfer and advise you of your refund by email.
What will happen after December?
We want to be able to lend your money in a reasonable time. If upcoming months are projected to have longer lending speeds, we’ll activate the platform limit. We will keep you informed about the platform limit via the Weekly Update email and your My Zopa dashboard.
You can find more detail in the FAQ section below, and as always, our Customer Services team are on hand.
Q: Why have the queues been increasing?
The queues have been increasing because Zopa has grown its investor base both in terms of new investors and total funds from investors. This growth has outpaced the growth of new loans. It is important to note that we have strict lending principles and will only lend to those who meet our risk criteria.
Q: What about existing money and repayments?
The platform limit only affects new money; repayments, and money already in the platform are not affected.
Q: Why can’t I just queue for longer?
We believe money should be simple and fair. We don’t think it’s fair for you to wait too long to lend out your money.
Q: How long does is usually take to start lending new money?
Since January 2016, the average time to start lending new money has been 5 days.
Q: What will happen when ISAs are launched?
We don’t yet have approval to be able to offer ISAs, when we know more we will give you an update.
Q: What happens for institutional investors?
Our current ratio of institutional and retail investments will stay the same.
Q: If my funds are returned, how long will it take?
We refund money by BACS, which typically takes 3 business days, depending on your bank.
Q: How long does it take Zopa to recognise that my funds need to be returned?
As soon as we receive your transaction, we will know that your funds need to be refunded. We will let you know via email and begin the refund process immediately.
There is a message when lenders login as follows:
We are not accepting new money transfers
We have a limit for new money into the platform so that we can aim to lend out your money in a reasonable time. This limit only affects new money into the platform: not your repayments or funds already in your holding account. Read more.
Any new money transfers into the platform will be refunded directly to your bank account.
Check the Weekly Lender for updates about the platform limit.
We are pleased to announce the winners of the P2P money Preferred P2P platform award 2016, as voted for by members of the P2P Independent Forum. The winners are as follows:
RUNNERS-UP: Saving Stream, Assetz Capital
There is also a noteable mention for Collateral, who almost beat Assetz Capital into the top three. For a company that only launched in May 2016, this is quite an achievement. Of the big three peer-to-peer platforms RateSetter was the only company within the top ten, but had dropped to seventh place from third in 2015. The highest place European platform was Mintos in nineth.
The members of the P2P Independent Forum are some of the most knowledgeable individuals on peer-to-peer lending, and as such these awards should carry some weight. The winners of the P2P money awards 2015 were Saving Stream, MoneyThing and RateSetter.
P2P money was the first to break the news that Zopa was launching a bank on Wednesday. The reaction from experienced lenders on the P2P Independent Forum has been mixed, with some accusing Zopa of going over to the dark side. The user hendragon wrote:
I understand that things move on and evolve. Zopa began as a market where borrower and lender met in the middle (Zone Of Potential Agreement). Loans were approved by underwriters before they were allowed on the market. Where applications were rejected the potential borrower could appeal directly to lenders via an auction process. This has now evolved to Zopa classic and plus. There is also the fact that Zopa is trying to become a bank and enter the establishment it set out to disrupt.
Latter day Zopa has strayed so far from P2P that it seems to want to become an entity that has left its original purpose behind. There must be severe pressure to start making profits and becoming a bank is one way to do it. As Zopa was the originator of the whole sector I cannot help but feel sadness at this outcome.
The user sl75 wrote:
It was clear that was the direction they were going in when they launched safeguard...
That was the point where it seemed to me that Zopa stopped looking at innovation, and instead sought to imitate the traditional banking system.
The question then is whether acquiring a banking licence will ultimately be used to allow the P2P side to become more innovative (branching out into new and innovative ideas that would scare off the mass-market investors who are more comfortable with something that looks like a bank, and even more comfortable with something that actually is a bank), or if the P2P side of the business will then simply be allowed to wither away and die over the following few years as the remaining P2P loans get paid off.
(compare with how Safeguard was originally introduced as an alternative to what were then "standard" P2P loans, and very quickly become the only available option).
So why would experienced lenders be wary of such a move? Zopa launched in 2005 as a lending exchange - matching borrowers to lenders like a financial dating website - cutting out the middleman. The big idea, taken from Zopa's website in 2006, was all about removing the bank from the process:
Here's the way the world works (and it must be right because it's been like this for hundreds of years...)
People who have spare money give it to a bank. Banks then do whatever they like with it. Some of it they lend to people who need to borrow. Some of it they give to their shareholders. Some of it they gamble on the price of tin, or the dollar going down, or whether there'll be floods in Asia. Banks make lots of money from all this, a fraction of which they give back to their customers.
Zopa though lets people who have spare money to lend it directly to people, like them, who want to borrow it. No bank in the middle, no huge overheads, no unethical investments.
To minimise any risk, the money each lender puts in is spread amongst at least 50 borrowers (and likewise each borrower gets their money from a number of different lenders).
Zopa is, therefore, for people who want to be a part of something new. Who want to join a community of like-minded individuals and lend to them and borrow from them in a trusting but secure way.
Zopa is for people who are looking for a better rate of return. Zopa's interest rates aren't squeezed by middlemen (the banks) because there are no middlemen - that's the Zopa idea.
Zopa is for creditworthy people who earn money in new ways, in ways that banks don't always recognise. People who are self employed, people who have peaks and troughs to their income, people who would be invisible to a bank's credit rating system but are seen and validated by Zopa's.
When Zopa launcged it targeted both lenders and borrowers who were looking for an alternative to banks. Zopa offered great rates to both lenders and borrowers and made finance interesting and personal again. It is perhaps reasonable to assume that these original lenders would look at the idea of Zopa launching a bank as a betrayal of its founding principles.
However there are more rational reasons to support this move. A number of innovative FinTech challenger banks are launching that are closer technologically and ethically to Zopa, than they are to classic banks. It is therefore only reasonable for Zopa to look at this as an opportunity for diversification and growth. Given than peer-to-peer lending is now regulated by the Financial Conduct Authority, the incremental effort to obtain a banking licence will not be as great as it would be for a new challenger bank.
It is likely the new Zopa bank and Zopa P2P platform would be separate companies under the Zopa unbrella. There is also the possibility that other top tier P2P companies such as Funding Circle could go down the same route, but it is unlikely to be a trend for peer-to-peer companies in general at this stage.
The world's first peer-to-peer lending platform - Zopa - is planning on launching a bank in 2018. Zopa has come full circle, having started in 2005 as an alternative to banks, and it is now launching its own bank, in addition to its current peer-to-peer platform. The Zopa bank will offer FSCS protected deposit accounts and overdraft "alternatives" to borrowers.
Jaidev Janardana, CEO of Zopa said:
“We launched in 2005 to create a richer life for everyone by making money simple and fair. We have lent over £1.8bn and inspired a £100bn global industry. 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”
“We are uniquely placed to re-define customer expectations of what a bank should deliver in the 21st century. Over the last 11 years we have delivered great value to borrowers and investors whilst prudently managing credit risk. Combining our pioneering data and tech-led culture with an obsession with fairness and customer experience, we are best placed to shape the future of personal finance in the UK.”
Below is a copy of the email sent to lenders:
I wanted to write to you, on behalf of everyone at Zopa, to share some important news.
We launched Zopa in 2005 to create a richer life for everyone by making money simple and fair. Since then, we have lent over £1.8bn, inspired a £100bn global industry and helped our lenders earn over £75m of interest. We have built a profitable, scalable and viable business. Yet we’ve only just begun.
We want to offer consumers even more choice, which is why, subject to regulatory approval, we are planning to launch a next generation bank to complement our existing peer-to-peer products.
We will continue to offer our peer-to-peer investment products.
Launching a bank, to sit alongside our existing peer-to-peer business, will allow us to create new and innovative savings and borrowing products. At launch, Zopa will offer FSCS protected deposit accounts to savers and overdraft alternatives to borrowers.
As an existing Zopa customer, we will give you the first opportunity to try out our new products. We will also actively welcome your input as we shape them.
The application process should take about 15-24 months, and we will keep you updated when we have news to share.
We believe we are uniquely placed to re-define what you should be able to expect from personal finance products in the 21st century.
Over the last 11 years, we have built an innovative, profitable and well-managed business. We have proven that we can deliver great value to borrowers and investors whilst prudently managing credit risk.
We know how to originate quality loans seamlessly online and meet our risk expectations. No new bank has that track record, and no incumbent bank has the digital expertise that we do.
We put our customers at the heart of all our decisions and obsess over how we can use technology to offer you simple, smart choices. We are looking forward to offering more products to even more people in the UK.
For now, thank you for investing through Zopa. I look forward to sharing this exciting journey towards the next generation banking we all deserve.
Zopa have also published a press release.
LendingCrowd has become the peer-to-peer business lending platform to receive full FCA authorisation moving on from interim permission.
Here is the email sent to lenders today:
Hot on the heels of our recent funding partnership with Scottish Investment Bank we are delighted to announce that we have moved from interim to full FCA authorisation from 1st November 2016. We are the first peer-to-peer business lender to move from interim to full authorisation status and the second in the industry to do so.
This means that LendingCrowd has demonstrated that it meets the rigorous statutory requirements of the FCA.
FCA authorisation matters for a number of reasons and indicates that we:
- have been subjected to detailed due diligence
- are committed to treating customers fairly
- have robust operational processes in place.
Full authorisation also paves the way for the launch of our Innovative Finance ISA product offering investors peer-to-peer investment opportunities within a tax-free wrapper.
Our CEO Stuart Lunn commented: “Peer-to-peer investing is growing in popularity every day. We are supportive of industry regulation and we’re extremely pleased that LendingCrowd has reached this milestone. It unquestionably adds credibility and trust in a relatively young marketplace in which our aim is to be a major player. It also means that we can look to launching our ISA product both direct to investors and through investment platforms, several of which we are already engaged with.”