Launched: March 2005
Status: Funded by Benchmark Capital and Wellington Partners
Zopa stands for “Zone of Possible Agreement”, which “is the overlap between one personâ€™s bottom line (the lowest theyâ€™re prepared to get for something) and another personâ€™s top line (the most theyâ€™re prepared to give for something). Itâ€™s the way people negotiate all sorts of stuff – buying a car, getting a mortgage – even a teenager negotiating with parents about staying out late. If thereâ€™s no Zopa, thereâ€™s no deal.”
Zopa is the first lending and borrowing exchange. What we do is very simple. We put people who want to lend in touch with credit-worthy people who want to borrow. And because there’s no middle-man – the borrower pays just a 1% exchange fee to Zopa upfront – both benefit.
We’re not sure about the “no middle-man” argument since Zopa is, in effect, acting as a middle-man and taking a 1% cut, but the idea is brilliant nonetheless, and it certainly seems to make it easier for people to borrow small amounts of money at reasonable rates.
Borrowing and Lending:
In order to lend or borrow, Zopa does a background and credit check on you to ensure that you are appropriate for their market. They attempt to do this online and with as little hassle to you as possible. Once you are approved you can lend or borrow money within various limits.
For instance, you may borrow from Â£1000 to Â£15000, in Â£500 increments. Lenders can loan a minimum of Â£500 and a maximum of Â£25,000. If you’d like to lend more than Â£25,000, you must obtain a license to become a “consumer lending business”. Zopa will help you through this process.
Zopa spreads the lending risk among many borrows to reduce overall loss risk. Contracts are set at Â£10 each and must be spread among at least 50 different borrowers. And Zopa aggresively pursues bad debts:
How does Zopa deal with bad debts?
If one of your borrowers defaults, Credit Resource Solutions Ltd, a collections agency, will undertake to recover any money outstanding. Should it be unable to do so after 120 days, you agree to sell the debt to a collections agency for a price that will be agreed at the time, but which will not be less than 10% of the amount then outstanding. The agency will pay a fixed percentage of the outstanding amount to us which we will pass back to you. We will not allow that borrower to borrow again and will suspend their membership. Furthermore, we will pass their details back to our credit referencing agency which may affect their ability to get credit in the future.
Zopa claims 16,000 registered members. Currently, Zopa is only open to U.K. residents who are more than 18 years old and have a bank account and personal Equifax credit rating. Additional information is available at their Help site. The Zopa team (quite a long list) can be viewed here.
Scott Loftesness (we first saw this at Scott’s site), Johnnie Moore (podcast interview with Zopa’s CFO, James Alexander and its Inventor, Dave Nicholson – includes partial transcript), Wired, PaymentsNews, Business 2.0, Matt Asay, BubbleGeneration, UserDriven