UK based digital bank Starling Bank is investing in P2P loans originated on the Zopa platform, according to a report in AltFi. The write-up quotes a Starling Bank representative that explained the arrangement:
“Starling is in a unique position among neobanks of having a very high value, high growth and high quality deposits. We currently hold over £1.25bn on deposit and the sum is growing at double digit rates every month. While we’re building our own lending capability, we are deploying some of our deposits in forward flow arrangements with selected lenders, including Zopa. We carefully consider inorganic opportunities that match our strict risk-return criteria with a view to sustainably growing our balance sheet.”
Starling Bank currently offers unsecured business loans of up to £250,000 and new business overdraft limits of up to £150,000.
The term loans for business have a term of one to five years and will be available to limited companies that have been trading for at least 18 months on application directly to the bank. The interest rate offered will be based on an assessment of the business and the representative APR is 7% (fixed) for loans up to £25,000. For loans above £25,000 the rates are provided upon application. Starling currently claims over 100,000 business bank accounts.
Starling Bank received a banking license in the UK from the Bank of England in 2016. It has differentiated itself with a marketplace approach by partnering with 3rd party providers to offer many different features to its users. Starling has raised over £320 million in investment with the most recent funding round taking place just weeks ago where Starling secured over £60 million.
Interestingly enough, Zopa – the doyenne of peer to peer lending the UK – also holds a banking license. For now, it is a restricted license but that is expected to change within the coming months as Zopa joins the race to become the bank of the future – feature-rich but minus costly brick and mortar locations.
The report indicated that Starling Bank is holding the purchased loans on its own books but Zopa continues to service them – an interesting relationship between the two Fintechs.