SNW INTERVIEW -- July 26 -- Forget the banks. Who needs credit cards!? Now you can just ask a favor from a perfect stranger and borrow money to buy a car, or consolidate debts. Zopa plays the part of middleman. Here’s my interview with the CEO. - Mark Brooks
What is the founding story of Zopa?
We talked quite a bit about the democratization of finance. We believed that for the consumer getting as a borrower as close as possible to the people who have money, lenders or investors, would benefit everybody. We launched in March of 2005 in the UK.
What is your background? What were you doing before Zopa?
I have been involved in financial services my entire career. I started as a teller at a bank many years ago. I worked in all sorts of different positions in banks. Most recently I was involved with 2 companies that originated consumer loans. So from that perspective as CEO of these two companies I got to see people that needed money and where we actually got the capital to make those loans.
How would you say Zopa is different from the competition like Prosper?
Zopa is the only international social finance entity with operations in Italy, the UK, the US and an office in Japan we can hopefully open soon. Zopa has always focused on safety. One area that we differ greatly from Prosper and Lending Club is that the investors are not exposed to credit losses on our loans in the United States. And even in the United Kingdom and Italy, where our investors are exposed to losses, we underwrite the loans very, very carefully. After 3½ years, we have only 7 bad loans in the UK. We do believe that making a loan is a very tricky and that Zopa has some responsibility in assessing peoples credit risk and ultimately not making loans to people who we don’t believe will repay the loans.
I’m a big fan of MicroPlace. Have you ever considered layering in offerings from charities as well?
Absolutely. What we offer in the United States is the ability for investors to open up Certificate of Deposits (CDs) when they forgive some of their interest and are actually helping borrowers.
Is there a particular country that has really grown more quickly then any other country?
We were the first ever to do this in the world, so when we launched in the UK it was a totally foreign concept to anyone, anywhere in the world. But as the UK population has become more aware and comfortable with our track record, the population has the least questions about how it works. The Italian marketplace launched very, very quickly and the United States were thrilled with Zopa too. 10 or 15 years ago, I’m not sure people would have understood it but today they really get it and they’re very intrigued by it.
Should banks be worried?
No I don’t think so. We are a consumer oriented organization. I don’t think Zopa will ever be making $50 million construction loans for office buildings, for instance. I can see us being a terrific compliment to a bank who is looking for a very consumer oriented proposition. We are already working with credit unions in the U.S. We provide a social networking interface to those credit unions. People come to Zopa because they like the concept and in the process of doing business with Zopa they become credit union customers too. One of the reviewers recently said that Zopa is a win-win-win proposition. The consumer comes out ahead, the financial institution comes out ahead and Zopa provides a service that doesn’t exist anywhere else, where the borrower can see who the investor is that is helping them very directly. That’s all part of that democratization of finance. And I do think that banks will be attracted to that concept of allowing consumers to see what is happening with their money.
What is your long term vision? Where could you see Zopa and the industry being in 10 years time?
I honesty think that the efficiency, convenience and trust that you get with dealing with an entity like Zopa will become more and more attractive to people. I can see this will be a multi-billion dollar business. 10 years from now or so, we’re going to have quite a bit of interactive social finance activities taking place with unsecured consumer loans and who knows beyond where that could go. Transactions involving currency exchange, transactions involved car insurance – that’s another thought, where a group of people will come together and pool their resources to provide the first tier of losses associated with car insurance and then they will buy a blanket coverage to provide a full coverage to everybody. As time goes on, we will see more and more of this democratization of finance taking place with transactions well beyond simply unsecured consumer loans.