UK’s P2P Pioneer Wants to Be a Bank. Who’s Next?

UK’s P2P pioneer Zopa is changing its stripes to turn into a bank.

The 11-year-old company, upbeat about the regulatory environment in the UK that is looking to bring innovation and entrepreneurship to banking, will apply for a license soon.  “Zopa has a history of creating innovative retail-facing financial services, driving consumer choice and transparency. We are responding to the positive regulatory environment and building on our experience to bring yet more choice to the market,” said CEO Jaidev Janardhan in a press release.

The new Zopa Bank will be a retail bank and provide deposit and savings accounts, thereby giving the company a stable funding source for its P2P platform.

This trend has also picked up pace across the pond, at home. For online lenders like SoFi that are adding lending products faster than they can secure sources of capital, the prospect of becoming a bank may now be more tempting than disrupting them. Marketplace lending companies in the US including Avant, Prosper and Lending Club are struggling to retain and grow investors on their platforms.

While tightening credit and raising rates to prevent delinquencies is one way to keep investors, some companies like SoFi have also started hedge funds to buy up their own loans. The advent of online lending promised to offer alternatives to the already chunky, fragmented banking system which was further straitjacketed by regulation like the Dodd-Frank Act which mandated banks have stricter lending standards. However, the rapid proliferation of the industry has brought forth concerns like fast depleting capital and waning investor interest. 

Will alternative lenders in the US also drink the kool-aid and become the entity they intended to overhaul?