Zopa Bank achieves profitability within 21 months of obtaining its full banking license with a potential IPO on the cards later in the year

  • Zopa Bank only obtained a full banking license in the summer of 2020
  • Before entering the banking sector, the group pioneered loans between individuals
  • A recent £220m fundraise secured the company unicorn status

Challenger bank and former peer-to-peer lender Zopa announced its first profit less than two years after obtaining a full banking license.

The fintech company has followed in the footsteps of Starling and OakNorth to become the latest – and one of the few – UK digital banks to break even.

Having only obtained a full banking license in the summer of 2020 as it sought to diversify its services and compete with large financial institutions, this also makes it one of the fastest online banks to achieve profitability. .

Select Few: Zopa Bank has followed in the footsteps of Starling and OakNorth to become the latest – and one of the few – UK digital banks to break even

Zopa added that it expects to remain profitable in the future as it continues its rapid growth, which has already seen it lend over £1bn, earn £1bn in deposits and become the one of Britain’s largest credit card lenders.

Prior to its transition into banking, the company helped pioneer peer-to-peer lending, a service that allows borrowers to obtain money directly from other people or businesses without going through a financial institution.

A decade after it was launched by former employees of defunct internet bank Egg, it had lent its first £1 billion to customers, and two years later it became the UK’s leading P2P platform. to lend more than £2 billion to its clients.

P2P has been touted as essentially eliminating the middleman from the lending equation – AKA, banks.

More recently, however, the P2P industry has come under increasing scrutiny from regulators such as the Financial Conduct Authority following the collapse of major lenders. , such as Funding Secure and Lendy.

The FCA has labeled the practice a “high risk” investment alongside mini-bonds and cryptocurrencies and completed a consultation on their promotion a fortnight ago.

In this environment, Zopa ended its peer-to-peer lending operations in December and returned money to around 60,000 P2P investors, who had their loans purchased at face value.

Leader: “Achieving profitability in just 21 months is a testament to our unique model of meeting customers’ needs by focusing on how they borrow and save,” said Zopa CEO Jaidev Janardana.

In a statement, the company said: “Unfortunately, over the past few years, client confidence in P2P investing has been damaged by a small number of companies whose approach has resulted in material losses for clients investing. in these platforms.

“Associated with this, changing regulations in the sector have made it difficult for growth and commercial viability.”

The group is now focused on growing its banking business, whose products range from personal loans to car finance and fixed-rate savings accounts, and is launching an IPO later this year.

To achieve this, the company raised £220m from investors in a funding round led by Japanese conglomerate Softbank and including hedge funds Davidson Kempner and Chimera Capital.

As a result of the fundraising, London-based Zopa has become the latest British fintech giant to achieve “unicorn” status – a private company worth at least $1 billion.

Jaidev Janardana, Group Managing Director, said: “The past year has been very successful for Zopa, as we exceeded our targets for new and existing products and raised $300 million under Softbank leadership to fuel our growth. accelerated.

“Achieving profitability in just 21 months is a testament to our unique model of meeting clients’ needs by focusing on how they borrow and save – the two things that impact finances the most.

“Today’s news makes Zopa one of the fastest-to-profit digital banks and reinforces our thesis on the importance of sustainable growth as a catalyst for accelerated product and market expansion. Marlet.”