Careers at Zopa
Zopa’s mission is to let a community of members help each other financially via the tools of finance and social networking.
Richard Duvall, James Alexander, and David Nicholson were all current or former employees of Egg, an online bank. The three wanted to start a new financial services business and conducted research to generate ideas. They found that there was a large market of “freeformers” – self-employed, freelance, or project-based workers. Specific examples included entrepreneurs and consultants. The group estimated that there were as many as six million of these in the UK population.
They saw that freeformers tended to have irregular incomes, even when creditworthy. As such, they were often treated as undesirable loan prospects by banks. The team observed how the bond market was great at finding finance sources for companies – giving investors the firms’ details so they could make informed decisions. It wanted freeformers to have the same opportunity. For inspiration, they turned to eBay and Betfair, two online marketplaces where customers could connect directly.
In 2005, they launched Zopa, an Internet marketplace facilitating peer-to-peer lending – one of the first to do so. The name is an acronym that stands for “Zone of Possible Agreement”. This is a negotiation theory term that refers to the overlap between a person’s top line (the most they are willing to pay for something) and another person’s bottom line (the lowest amount they are willing to accept for what they are offering). It is the aim of negotiations for most products and services.
The site connects individual borrowers seeking low-rate loans with lenders seeking better returns on their money. Applicants’ credit scores are assessed prior to using the site, after which they are separated into different lending pools based on creditworthiness. Money from lenders is then distributed to the different pools according to comfort level. Zopa generated significant attention and grew quickly – increasing from an initial customer base of 300 to 25,000 within months.
By the end of 2006, the average borrower received a loan of £5,000, while the average lender offered £3,000 per transaction. Zopa attracted significant startup capital in its first few years, including $1 million in 2005, $20 million in 2006, and $12.9 million in 2007. Investors included Bessemer Venture Partners, Wellington Partners, Benchmark Capital, and Augmentum Capital. As of 2016, the company has lent over £1 billion for everything from cars to home improvement.
Benefits at Zopa
Business model of Zopa
Zopa has a multi-sided business model, with two interdependent customer segments that are both needed in order to operate:
- Borrowers: Consumers who wish to obtain loans outside of traditional sources such as banks.
- Lenders: Individuals seeking better returns on their investment money from borrowers.
Zopa offers six primary value propositions: accessibility, convenience, cost reduction, risk reduction, performance, and brand/status.
The company creates accessibility by enabling borrowers who are normally seen as a risk by banks to obtain personal loans from other individuals who are able and willing to lend them money. Applicants can borrow up to £25,000, and loans are available for a wide variety of purposes.
The company offers convenience to borrowers by providing flexible terms. Loans are available over a period of one to five years. In addition, applicants can view tailored loan rates in just three minutes.
The company reduces costs by providing loans at lower rates than regular banks – they range from 5.9% to 12%. Moreover, it does not charge early repayment fees. Customers can repay as soon as they like or make extra payments without penalty.
The company reduces risk for borrowers by ensuring that loan quotes do not impact applicants’ credit scores. It reduces risk for lenders by performing credit and identity checks on borrowers and utilizing collections agencies to contact borrowers about missed payments.
The company has demonstrated strong performance. It has lent £1.49 billion from more than 63,000 lenders to over 150,000 consumers since 2005. It lends over £2 million a day on average, with the average loan amount equaling £7,300. For lenders, it provides an average return of 6.2% (after fees and before bad debts). Investors have earned millions of pounds in interest since the service began.
The company has established a powerful brand as a result of its popularity. It bills itself as Europe’s largest and the world’s oldest peer-to-peer lending service. It has been voted the “Most Trusted Loan Provider” by the Moneywise Customer Service Awards every year from 2010 to 2015. Other honors it has received include recognition as MoneySuperMarket’s “Best Personal Loans Provider” from 2014 to 2016, one of the UK’s “Most Disruptive Tech Companies” by Tech City Future Fifty, and “Growing Business of the Year” in 2015 by Real Business.
Zopa’s main channel is its website, through which it obtains most customers. The company promotes its offering through its social media pages.
Zopa’s customer relationship is primarily of a self-service, automated nature. Customers utilize the service through the main platform while having limited interaction with employees. The company’s website includes case studies and detailed answers to frequently asked questions. That said, there is a personal assistance component in the form of phone and e-mail support.
Zopa’s business model entails maintaining a robust common platform between two parties: borrowers and lenders.
Zopa actively invites other entities to join it in partnership – specifically those who share its goal of “making money simple and fair.” Organizations of interest include affiliates, banks, brokers, and online retailers. The company currently maintains the following partnerships:
Metro Bank – Lends money to consumers on the Zopa platform, expanding its reach.
Uber – Obtains loans from Zopa for Uber drivers who want to buy their cars.
Unshackled – Receives financing from Zopa for handset sales in its mobile phone marketplace; it integrates Zopa’s technology into its website through the company’s Partner API, allowing customers to spread out handset payments over two years.
SalaryFinance – Obtains loans for its employees that can be repaid through salary deductions.
Zopa’s main resource is its proprietary software platform, which serves more than 63,000 lenders. It depends on its engineering employees to maintain and update the platform and customer service staff to provide support. Lastly, as a startup it has relied heavily on funding from outside parties, raising $56.63 million from nine investors as of January 2014.
Zopa has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is likely transaction expenses, a fixed cost. Other major drivers are in the areas of customer support/operations and administration.
Zopa has one revenue stream: transaction fees. These include a fee for borrowers and an annual fee of 1% for lenders.
info: Giles earned an undergraduate degree in Experimental Psychology at Oxford University and an MBA at INSEAD. He previously served as Chief Executive Officer of Zopa and as the Co-Founder of Caverdale, a revenue motor retailer.
info: Jaidev earned a B.E. in Electronics at Dharmsinh Desai University and an MBA at McGill University. He previously served as Chief Operating Officer of Zopa, as well as Chief Marketing Officer and Chief Credit Officer of Capital One UK.
info: Amy earned a BBS in International Business and Marketing at Trinity College, Dublin and an MBS in eCommerce at University Colege Dublin. She previously served as Director, Product & Channel Marketing at Audible and Head of Product & Expansion at Streetcar.
info: Andrew previously served as an Associate Partner at Oliver Wyman, a management and strategy consulting firm, worked at Capital One, and launched his own direct banking startup. He is responsible for overseeing the underlying performance of Zopa loans.
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