An interview with Zopa’s Giles Andrews

Credit is a commodity that’s very much in demand these days. The failure of the banks has left both businesses and individuals high and dry when it comes to borrowing money.

Credit-worthy customers are being turned away in their droves and those that can get past the paranoid underwriters are being offered derisory rates. But when there’s a gap in the market, it’s usually only a matter of time before someone comes along to fill it – even if it takes lots of cash to do so. Zopa appears to have the answer to our lending woes, and is enjoying exponential growth as a result of the credit crunch. The online business enables everyday punters to become lenders and enjoy interest rates that savings accounts can no longer offer. Effectively a peer-to-peer lending site, users of Zopa invest money in the business, which it then lends to individuals and companies on their behalf and shares in the profits. You can start with as little as a tenner and get a choice on the risk profile of the people you lend to.

Credit-worthiness is first assessed by Zopa’s underwriters and failed debtors are pursued in the same way as any others. It’s a simple idea, which for some reason hasn’t been done successfully before. “It’s the internet and having access to reasonably priced IT technology that has made this possible,” explains managing director Giles Andrews. The vast majority of the business is conducted online and so far Zopa has managed to operate with just 15 staff. An operation that is almost entirely paperless has made the key difference. “If we were a paper-based business, we would have filled this office 10 times over by now,” says Andrews. Zopa began in 2005, led by Richard Duvall, a founding member of the credit card company Egg. It has taken funding from venture capitalists, such as Bessemer Venture Partners and Balderton Capital, as well as from private individuals, such as Tim Draper and the Rowland family. Well-backed and managed, Zopa proved an early hit with members of the internet community. Sadly, Duvall died of cancer in 2006, but his co-founders have taken his vision forward.

Zopa asked to be regulated by the Financial Services Authority (FSA), but was turned down because it can’t be classified as a bank or an investment manager. “We would be happy to be regulated by the FSA, but it would take an Act of Parliament,” explains Andrews. “So we are licensed by the Office of Fair Trading instead.” Nevertheless, the business has been able to expand its appeal, and in the current climate it’s well placed to take advantage.

Since last summer, activity has moved up a gear, with site membership and lending increasing by 81% and 78% respectively. “What’s interesting is that the business is moving from being a niche in the IT crowd to becoming more mainstream,” Andrews says.  Indeed, Zopa has lent £34m since starting up, lending £2.2m in January 2009 alone, with £30m projected for the year. So amid the lending gloom there appears to be a glimmer of democracy returning to the financial sector. We are all sceptical of ‘our stake’ in the failed high-street banks, but perhaps the chance to make a profit out of lending isn’t so unlikely after all.



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