Peer-to-peer lender Zopa launches digital bank after receiving full licence

Zopa is launching a new digital bank after receiving its full banking licence, the British peer-to-peer lender announced today.

The peer-to-peer loan sector has come under pressure from increased regulatory scrutiny and weakening demand from investors, placing pressure on firms to diversify their revenue streams.

Zopa first announced plans to pursue a second revenue stream in the form of retail banking in 2018. It secured a partial banking licence that year, and made its first foray into banking the following year.

“Now more than ever the banking industry needs innovative, agile providers who work on behalf of customers,” said Zopa chief executive Jaidev Janardana.

“Securing our banking licence enables Zopa to play a wider role in the financial lives of our customers, as well as offering much needed choice and competition to the wider market,” he added.

Founded in 2005, Zopa says it has had 500,000 customers across its peer-to-peer lending and investment arms.

Zopa’s new bank will first offer a fixed-term savings account before introducing a credit card later this year, the company said.

The lender raised £140m – its largest funding round to date – last year to allow it to meet regulatory capital requirements to become a bank.

The cash injection was provided by an entity connected to US-based private investment firm IAG Capital Partners and its UK arm, Silverstripe.

“Beyond the current pandemic, Zopa is uniquely placed to provide a compelling alternative to traditional banking by leveraging its significant technological and financial services expertise to offer a wider range of great products,” said Janardana.