Zopa Doesn't Have A Problem

Peer-to-peer lending works for many people.

Zopa has a crowd of good customers and new borrowers have lenders queueing up to offer funds. An article in Alt-Fi News suggests Zopa has a problem. We don't agree. 

Zopa has told the market repeatedly that it has no intention of compromise on its credit checking It would rather close its doors to new lenders than push it out to borrowers who have a higher risk of defaulting on their repayments.

That strikes us a very good business model, one that's true to the philosophy of peer-to-peer lending and keeps Zopa away from the easy credit that got the big banks and so many of their customers into trouble.

Only a week ago, the credit-scoring agency Aire published research that suggests people who don't understand money and debt borrow too much. This is not a practice we want to see encouraged. After all, Zopa says on its home page, they want money to be simple and fair.

But there is a problem, Ryan Weeks writes, and he talks about how he wants Zopa to solve it.

"The platform told the Financial Times last week that it hoped to reopen to new investors in early 2018...  In the meantime, the company is careering towards getting a banking licence. [But] if Zopa can’t currently find enough borrowers to satisfy the demands of marketplace investors, where on earth does it intend to find willing recipients for its deposit capital?

The articles goeson to describe Zopa's plans to launch "a number of new borrower-facing products as part of its bank launch", and a partnership with the Saffron Building Society that will give Zopa's brand a presence in the High Street. If you want to know more about Zopa's strategy, we recommend the whole article on Alt-Fi News, but we want to break away at this juncture and make a simple point.

Maybe it's better if peer-to-peer lending platforms don't become banks.

Peer-to-peer lending works. We are delighted that there are plenty of lenders, and that lenders and borrowers are both being treated well.  Why don't Zopa and other lending platforms just carry on doing what they are good at for a while longer, at least?