Zopa is a pioneering financial services company that offers loans and investments. It has approved more than £3bn in personal loans since it came to life in 2005, a journey which earned it a reputation as Europe’s leading peer-to-peer consumer lender. In 2017, Zopa became the first major peer-to-peer lender to receive full FCA authorisation. The company reached the £3bn lent-to-date milestone in January 2018. This follows 2017’s milestone, when Zopa became Europe’s first peer-to-peer platform to pass £2bn. The company hopes to achieve another set of exciting milestones over the coming year as it launches a bank in order to broaden its product offering to customers. The Fintech Times spoke to Zopa CEO, Jaidev Janardana, who believes that a focus on tech innovation, including letting customers know in seconds whether they are pre-approved for a loan, alongside a range of initiatives and partnerships to reach new customers, fueled the progress.
Today Zopa is the largest lender for prime consumers on price comparison sites and a market leader in digital channels. What do you think are the biggest challenges for the digital lending market?
We have gotten to where we are by offering competitive pricing and a far superior experience. However, a majority of customers even today go to their bank for their loan. While they are usually not satisfied with the experience, consumers are not aware of the alternative options. Making customers aware of the choices available to them through building brand awareness is one of the biggest opportunities that we face at Zopa.
How do you perfect your model for measuring creditworthiness?
Zopa’s model for creditworthiness relies on three pillars: Its data: Zopa has data going back to 2005, that can be easily accessed and analysed. Having this data, that has been through the credit cycle and covers the great financial crisis, is a huge differentiator for us compared to other fintech firms.
Its people: At Zopa, we have a unique combination of data scientists who are experts at advanced statistical techniques, and credit risk experts with years of experience in lending. This means that our models capture the best insights that can be gleaned from machine learning, while making sure that these deliver great customer outcomes and are robust through different economic environments.
Technology: Zopa’s technology stack is state of the art, enabling easy implementation of models using complex techniques like neural networks or gradient boosting, while delivering excellent customer experience in terms of run time and availability.
Do you agree that data science is essential in digital lending and how do you think can it be improved and perfected? Maybe AI, machine learning can help?
Using data and technology to deliver better customer outcomes forms the basis of our business model. The first principle of building great data science capability is that it should be centred around a culture of customer obsession. We need to make sure we understand the customer needs and what they value so that we are solving the right problems, problems that would deliver products and experiences that our customers love. Then we have to make sure that we hire the best people, give them access to rich data that is clean and easy to access and analyse, and a technology environment that makes it easy to implement the models and solutions built.
Open banking is going to open up alternative data sources to be utilised for credit scoring, but no one knows how it works long term. Are fintechs right to go it alone or can banks provide the trusted brand augmented by core product offerings?
The opportunity of Open Banking is to give customers access to their data and give them the choice on how to interact with their money. The main objective is to increase competition and choice for customers, so we feel it is better for firms like us to go it alone. Over the last 13 years, Zopa has built a strong trust with its customer base by consistently delivering simple and fair products and a world class customer experience. We hope to leverage that trust and offer our customers a variety of different products, including Open Banking enabled money management solutions.
To read more about open banking, check our article; Open Banking After The First Six Months
2017 was a year of strong and sustainable growth for Zopa, with 2017’s revenue of £46.5m up 40% on 2016 (£33.2m revenue, loss of £5.8m). How do you evaluate this milestone and what are you focused on at the moment?
2017 was a landmark for us. We just announced a 2017 profit after tax of £1.5m for our peer-to-peer business. This marks our move back into full year profitability. We’re proud to see the company’s efforts reflected in our record lending figures, profitability and strong customer growth. The rise in revenue sits alongside an increase in money lent out, with 2016’s £690m up by 43% to £985m. Over the last five years, Zopa has grown its lending and revenues at over 65% CAGR.
It’s a big step towards Zopa’s vision to be the best place for customers’ money. We’ve invested significantly in technology, in our proprietary back office infrastructure, and in our people, all of which have helped Zopa to continue to scale and grow sustainably. At the moment we’re focused on launching a digital bank which will allow us to offer a broader set of products to our customers.2017 was a landmark for us. We just announced a 2017 profit after tax of £1.5m for our peer-to-peer business. This marks our move back into full year profitability. We’re proud to see the company’s efforts reflected in our record lending figures, profitability and strong customer growth. The rise in revenue sits alongside an increase in money lent out, with 2016’s £690m up by 43% to £985m. Over the last five years, Zopa has grown its lending and revenues at over 65% CAGR. It’s a big step towards Zopa’s vision to be the best place for customers’ money. We’ve invested significantly in technology, in our proprietary back office infrastructure, and in our people, all of which have helped Zopa to continue to scale and grow sustainably.
At the moment we’re focused on launching a digital bank which will allow us to offer a broader set of products to our customers.
