Zopa is an un-bank of sorts, a peer-to-peer finance operation. Zopa brings lenders and borrowers together in an online marketplace, letting the lenders (i.e. people like you and me) offer funds at a specified rate, for a specified term, with limits on the level of risk. Borrowers look at the funds on offer, and choose whether to take at that rate or wait for a better deal. Zopa makes the market, provides administrative and matching services, and underwriting services, but it does not itself lend money.
Zopa has recently launched in the US, from it's UK origins, and decided to do some focus group research in advance of the launch. In the spirit of open-ness that seems to define this company, they have disclosed clips of the focus groups through a link on their blog, here. Or go directly to the clips here. (Quicktime required. And it takes a minute to download.)
The remark I found most interesting was the woman who wanted to help struggling artists, but couldn't figure out how to find them, and thought Zopa would be a way to lend them money safely. I guess the instinct to be a patron of the arts continues, even though most of us don't have the money of the Medici.
Zopa uses some clever marketing tactics, such as paying for referrals. If you are an active Zopa lender and bring in another member who completes a transaction, you both get paid 30 pounds.
Zopa's blog invites guest authors to write. Here's an example from Philipg27, a Zopa lender, who writes that Zopa is not a community, it is a market, and compares it to Lloyd's of London insurance. Philip27 takes the company to task for weaknesses in it's online functionality.
...most importantly for Zopa the message is that Zopa should be working towards making the market easy to use rather than attempting to foster a sense of community. The website is notoriously difficult to use, it should be as simple to use as my online-stockbroker, and provide me with enough information to make informed decisions on the most effective options to lend money. I don’t really need pictures of people jumping over mountains whilst baking bread. I need cash flow statements, better reporting and maybe even some idea of what’s happening to my loans being processed that are currently lost in the Zopa Triangle …
Prosper is the other major peer-to-peer lending operation, with a few differences from Zopa.
Prosper permits lenders to form syndicates on their own, and choose their borrowers. Borrowers can also become part of a group, where the group's reputation rises and falls based on repayment patterns, which then affects their interest rates and ability to attract lenders.
Prosper is a bit more wild and entrepreneurial in approach than Zopa, permitting lenders to take undiversified risks by lending a lot to one individual or group. Zopa forces lenders to diversify. Now that they are both operating in the same market, it will be interesting to see how things shake out.
I expect it will be a few years before we really see how these approaches work as a business. Meantime, it's fascinating watching how both operations differentiate from banks in their communication approach. If this approach really works, it seems obvious that a big player would try to enter the action, perhaps with a sub-brand, just as a few are now in the payday loans business using subsidiaries.
