01 Jun
insights

The blueprint for the bank of the future

We are delighted to announce our investment in UK peer-to-peer lender Zopa, alongside Indian conglomerate Wadhawan, in a series of transactions totalling £32 million.

Zopa is the latest investment out of our €350 million fund NZVIII, and our biggest investment in the UK to date, joining existing fintech portfolio companies such as iZettle, Klarna, MarketInvoice and Qapital.

Customer-centric vision

We have known the Zopa team for a number of years, and are massively impressed by their execution of a very ambitious vision. They have blazed a trail in the P2P consumer lending market, and now, are looking to take the next step by building the technology-led retail bank of the future. Having put transparency and good customer service at the core of their business since its launch in 2006, and backed up by strong growth, they already address the pain points of traditional banks. In doing so, they have created a blueprint of what it takes to build a sound next-generation bank without compromising on the need for prudent credit practices.

Convergence with incumbents

Zopa was the first, and is currently the largest, European P2P consumer lender, having facilitated over £2bn loans on its platform. Last year, it became the first European P2P lender to obtain a formal credit rating, and has taken a first step towards the full banking licence process, with an FCA P2P approval. It has also placed £150m with institutional investors, providing a strong base of trust within the incumbent institutional capital market.

This is a trend we have seen elsewhere in the fintech companies we invest in, where there has been a move towards convergence with the incumbent financial market players. Through its securitisation transaction last year, Zopa has already given capital markets direct access to participate in its P2P offering. And with the FCA banking licence, they will eventually allow current account holders to participate, and extend the range of products offered. Thus, they will have effectively reverse-engineering the process of building a bank, but via a much more direct approach. We think this ultimately provides a more efficient model.

A bright future

Seen to the amount of lending on their platform, Zopa is already the largest digital challenger bank in the UK, and we are convinced with the new licence, they will become a powerhouse, making much larger inroads on the annual £45+ trillion UK consumer lending market. The benefits of a banking licence clear, as they will have access to much more scalable and long term efficient capital base, and ultimately are able to provide their customers with more choice, and better deals. We are excited to join them on this journey.

Read more here.