Just launched: UK-based Zopa, a place where creditworthy consumers who'd like to borrow money can get together with other consumers who are happy to lend it to them. Cutting out the middleman, lenders set their own rate of return and choose which borrowers they want to lend to. Zopa manages various 'markets', matching lenders with borrowers' various risk profiles. Intrepid lenders might choose borrowers at a lower credit band who can give them a higher rate of interest. Cautious lenders can choose borrowers at a higher credit band, but then of course the rate will be lower.
To reduce overall risk, an individual lender doesn't actually lend to an individual borrower; instead a lender lends money across at least fifty Zopa borrowers, and similarly a borrower borrows from a group of Zopa lenders. All lenders and borrowers enter into a legally binding contract with their respective borrowers and lenders. Zopa manages the collection of monthly repayments and if any of that money is not paid on time, it uses exactly the same recovery processes that mainstream banks use.
Zopa's gain comes from charging borrowers an exchange fee of 1%, and -- if borrowers take out repayment insurance on their loans -- Zopa receives commission from the insurance provider. Lenders aren't charged by Zopa. Changing the rules of yet another game (by killing the fat margins banks charge for their mediation), the company is jointly backed by Munich-based firm Wellington Partners, which invested in Alando, now the German eBay, and Benchmark, which backed Betfair and eBay. Looks like this new 'eBay for money' is well-positioned for online riches.
Opportunities
Remember Kevin Kelly's and Nicholas Negroponte's pie in the sky predictions on incredible online transparency, matching any imaginable supply and demand? Ten years later, the eBays and Match.coms of this world are not only thriving on this vision, they're also constantly inspiring other entrepreneurs to challenge existing business models with new peer-to-peer services, centered around loans or junk or dating or music. Offering consumers empowerment AND higher margins/better results: that's something any marketer should be willing to invest in. One to watch!
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It's launched in the US, Japan and Italy since this article was published, so a good spot.
Interestingly rates on Zopa seem to be rising as the credit crunch hits the rest of the world:
http://monevator.com/2008/03/27/are-rising-zopa-interest-rates-an-opportunity-or-a-time-bomb/
Strikes me that the credit crunch will be the making or breaking of Zopa... will people be less likely to default on 'real' people?
An excellent and timely. An idea whose time has come.
Miss Kate Hillier | April 8, 2007 10:59 PM