News & Views - Savantor

Zopa comes of age

Tuesday, 01 May 2007

An unusual award winner caught the eye recently with Zopa (www.zopa.com) winning an award for best banking web site beating off competition from Bank of America and Chase Online.  What is unusual about this is that Zopa is not a bank.  It classifies itself as a social lending site.  In two years, Zopa, which stands for zone of possible agreement, has attracted more than 140,000 users. The website, run by ex-employees of online bank egg and backed by the people who helped set up eBay, will launch later this year in America, then on the Continent, and it has plans for Asia.  It operates as follows

  • Borrowers are credit scored to establish whether they're an A*-, A-, B- or C-rated borrower.
  • Lenders make lending offers – stating what rate and for how long
  • Borrowers size up the rates offered to them, and take the ones they like the look of. If they don't like the rates today, they can come back tomorrow to see if things have changed.
  • Borrowers enter into legally binding contracts with their lenders.
  • Borrowers repay monthly by direct debit. If any repayments are missed, a collections agency uses the same recovery process that the high street banks use.
  • Zopa earns money by charging borrowers a 0.5% transaction fee and lenders a 0.5% annual servicing fee.
  • Zopa says only 0.2% of its borrowers default on a loan, equivalent to one in 500, compared with a typical rate of about 5 - 7% suffered by High Street banks.

Given the amount of publicity surrounding claims for unfair charging currently facing the banks, the popularity of organisations like Zopa may provide further cause for reflection.

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