December 4, 2018updated 03 Jan 2019 3:33pm

Zopa aims to become “major force in retail banking” with launch of digital bank

By Ellen Daniel

Peer-to-peer lending service Zopa has today announced that it is launching a bank, making it the “world’s first hybrid peer-to-peer and digital bank”.

Zopa is the latest in a growing number of “challenger banks” looking to take on legacy banks and re-think how money is managed. According to a poll conducted by YouGov, 66% of UK adults do not trust banks to work in the best interests of society, and this lack of confidence has created a gap in the market for alternatives looking to redefine banking.

According to a survey by the FCA, only 40% of UK adults have confidence in the financial services industry, and Zopa’s own research reveals that over half of British adults don’t think their banks operate with customers’ best interests at heart.

In contrast, according to a recent survey by Which? challenger banks have the highest level of customer satisfaction, with digital-only bank Monzo topping the rankings at 86% customer satisfaction.

Zopa joins the challenger banks

Now that it has its banking licence, Zopa hopes to do the same. The company claims it has delivered significantly higher customer satisfaction than high street banks since it launched as a peer-to-peer lending service back in 2005 and hopes to continue this by avoiding hidden fees and charges, an easy-to-use app and offering Innovative Finance ISAs.

As well as continuing its current services, Zopa plans to begin rolling out new products across next year, including a fixed-term savings product protected by the Financial Services Compensation Scheme (FSCS), a credit card and a money management app using “innovative proprietary technology”.

Last month, Zopa closed its fundraising round at £60m, generating the funds necessary to establish its digital banking arm.

Currently, Zopa has a bank licence with restrictions. This is called the ‘mobilisation’ phase of the process, where the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) put some restrictions in place. Zopa will be granted a full licence once it meets the conditions set by the regulators in the mobilisation phase– matching the way that high street banks are regulated.

Jaidev Janardana, CEO of Zopa, said:

“Acquiring our banking licence is the starting point for Zopa to become a major force in retail banking. When we pioneered the peer-to-peer lending model globally in 2005, we did so by listening to customers and creating a better product for them. We will bring the same focus to our banking products – drawing on tech innovation, our values of fairness and transparency, and better customer service to help even more people to feel-good about money.”

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