Zopa is to exit the peer-to-peer lending market that it pioneered, in the latest sign of the decline of the once promising industry.
Jaidev Janardana, chief executive, said that it would close its peer-to-peer book in January after concluding it was no longer “commercially viable”.
Zopa was founded in 2005 and invented the online peer-to-peer model, matching individual investors with borrowers. The initial idea was for a fairer finance system than provided by traditional banks and credit card providers.
Scores of rival platforms subsequently launched, arranging for hundreds of thousands of people to lend tens of billions of pounds to consumers and small businesses.
However, Janardana told AltFi, a fintech trade publication, that tighter regulation of the industry and growing negative sentiment towards it during the pandemic had contributed to a decision to leave the market.
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“We just don’t see a way of actually commercially viably continuing to offer this product while giving the right returns to investors. It was a very difficult decision for us. It’s a business that we’re proud of, in fact, we invented it,” he said.
Zopa, which attracted 90,000 peer-to-peer investors, will instead focus on its banking and credit card business. The bank will buy the peer-to-peer portfolio at face value and investors will receive their funds back by the end of January.
“There will be no impact on borrowers, as Zopa Bank already services them,” Janardana said.
Martin Campbell, a veteran consultant to the alternative finance industry, said it was depressing that Zopa had decided to abandon peer-to-peer entirely to “join the bad boys of banking it was originally launched to disrupt”.
Zopa was one of the “big three” of peer-to-peer. The others were Ratesetter, which was acquired by Metro Bank last year and has closed its peer-to-peer business, and Funding Circle, the listed small business lending platform, which now gets the majority of its loan funds from institutions and has been closed to retail investors since the pandemic.
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The industry has been the subject of a series of chaotic collapses and governance scandals that have led to the loss of tens of millions of pounds of retail investors’ money.
A number of other platforms restricted investor withdrawals during the pandemic as investors rushed to exit.
Janardana said that the resulting tighter regulation had increased costs while declining consumer trust in the industry made attracting new customers hard, “considerably weakening the attractiveness of the business for Zopa and for our investors”.
