Zopa to Offer “Feel Good Money” Digital Bank
Peer to peer lender Zopa has received authorization from both the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) to operate its much anticipated digital challenger bank. Initially, Zopa will operate with a bank licence with restrictions.
Zopa explained that this is called the “mobilisation’ phase” as regulators put some restrictions in place. A full licence will be granted once it meets the conditions set by the regulators.
In a blog post this week, Zopa warned the traditional banking worl to “watch out,” as it prepares to “redefine the industry” and offer financial services beyond its traditional online lending platform.
Zopa said it will begin its new service next year. The digital bank will include options such as a fixed term savings product protected by the Financial Services Compensation Scheme (FSCS), credit card and a money management app.
Zopa said it would create the “world’s first hybrid peer-to-peer and digital bank” offering a diverse set of financial services.
Pointing to a statement by the FCA that just “40% of UK adults have confidence in the financial services industry,” Zopa sees opportunity in becoming a digital bank unencumbered by green-screen legacy tech and unnecessary brick and mortar branches.
Jaidev Janardana, CEO of Zopa, said that acquiring their banking license is a starting point for Zopa to become a “major force in retail banking:
“When we pioneered the peer-to-peer lending model globally in 2005, we did so by listening to customers and creating a better product for them. We will bring the same focus to our banking products – drawing on tech innovation, our values of fairness and transparency, and better customer service to help even more people to feel-good about money.”
Zopa explained it would redefine banking with the following services:
- Giving customers a fair deal as standard – with no catches like sign-up offers that aren’t available to existing customers or hidden fees and charges.
- Making sure money management is simple and a real person is available to discuss
- Going beyond ‘good enough’
Zopa enters the digital banking realm at an interseting time. Several Fintechs have moved aggressively to provide banking services all available on a smart phone. Recently, global investment bank Goldman Sachs entered the UK digital banking arena with the launch of Marcus. Their spin on the future of banking quickly captured tens of thousands of users lured in with higher interest rate current accounts.
Zopa was the trailblazer for peer to peer lending in the UK as the first platform to create a marketplace for loans provided directly by outside investors. While not leading the digital banking charge, the years of Fintech experience and positive reputation in the UK should help Zopa capture significant traction as consumers, and businesses, migrate away from high street banks.