Zopa becomes first P2P lender to obtain full UK banking licence

The alternative lender has been granted a banking licence by the Financial Conduct Authority in a move that will help it compete with mainstream banks.

Financial Conduct Authority (FCA) Logo
Source: Bloomberg

Zopa has become the first pee-to-peer (P2P) lender to obtain a full UK banking licence from the Financial Conduct Authority (FCA), marking a major step for the alternative lender in its journey to become a competitor to mainstream banks.

The decision to grant a full banking licence by the FCA has led Zopa to create two businesses that will operate under the Zopa Group banner.

‘This is a huge milestone for Zopa as we are now the world’s first combined peer-to-peer lender & digital bank,’ Zopa CEO Jaidev Janardana wrote in a recent blog post. ‘It also brings us one step closer to being the best place for money in the UK by offering a broader selection of personal finance products.’

‘We know that over half of British adults don’t think their main bank has their best interests at heart.

‘By launching a bank ourselves, we want to build on our P2P heritage to help even more customers take the stress out of money,’ he added.

Zopa bank

The new bank will give Zopa greater access to funding with the lender adding a new fixed-term savings account and credit card to its suite of financial products. Both products will run alongside Zopa’s personal loans and P2P investment products, including its Innovative Finance ISA (IFISA).

The company is also looking to launch a new money management application.

In the last two years, the P2P lender has raised around £60 million in funding across to rounds from investors including integrated financial services group Wadhawan Global Capital and early-stage venture capital firm Northzone, according to Crunchbase.

Zopa will use the latest round of investment towards the capital needs for its next generation bank.

Greater scrutiny on P2P lending market

The decision by the FCA to award Zopa with a full UK banking licence comes just five months after it published a paper where it outlined its concerns about the P2P lending environment.

In the paper, the FCA said it was concerned that many investors were exposed to considerable risks and were not being sufficiently compensated for doing so.

‘We are not comfortable that risk and reward are always balanced appropriately on all P2P platforms, and we are concerned that investors cannot assess their risk exposure due to the way platforms operate,’ the paper, which was posted in July, said.

Many of the concerns that the FCA has are based on the P2P lending market being in its relative infancy, with the companies in the sector yet to complete an economic cycle. Therefore, there are still many questions left unanswered about how stable the market really is and whether default rates will increase, despite remaining relatively low.

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