Is P2P lending about to hit the sweet spot by becoming G2B?
Zopa has just closed another round of investment with investors including Augmentum (backed by RIT Rothschild) who are obviously hoping that the industry is poised for growth. The banking back-drop certainly continues to be favourable for Zopa, in fact I would say that it is surprising that P2P lending isn’t a bigger force when banks are being so cautious on lending. So why is this….?
Zopa and other P2P lenders have always been extra cautious on who they approve as borrowers to maintain a very low default rate. Whereas the likes of Wonga have been very aggressive at the other end of the spectrum. I know Wonga isn’t P2P (perhaps an opportunity for a brave entrepreneur!) but it is still an online lending platform. But Wonga will clearly not be bought out by a bank, due to the adverse publicity of pay day lending, whereas Zopa is probably being watched closely by the likes of Barclays and HSBC.
Zopa has focused on the respectable creditworthy end of the market, which is far less profitable than the short term end of the market. My guess is that it has taken Zopa up to the last year or 2 to become profitable. Zopa’s funding/investment to date is a mouth-watering $33m.
Now for possibly the game changer for P2P lending: The government is lending £55m to small UK business’ through sites such as Zopa who will receive £10m from the government. So does this make it G2B, and is this part of the rather dubious QE 3 (+).
Although I am very much against money printing and government intervention in finance and banking, I would be happy for Zopa and such sites to gain momentum on the back of this initiative.
Alternative finance platforms such as P2P lending and online FX providers are generally very niche, each performing different tasks better than the banks are capable of doing. Perhaps it is time for someone to bring a few of these niche products under one roof!