Zopa pulls out of P2P consumer lending as it blames cowboy firms for ‘damaging customer trust’
Peer-to-peer giant Zopa has started to inform customers it is closing down its P2P consumer investment division, transferring its loan portfolio to its relatively new bank unit.
In an email to customers, Natasha Wear, peer-to-peer CEO at Zopa, wrote that “after 16 years of peer-to-peer consumer investments at Zopa, we’ve taken the difficult decision to close this part of our business..
“To support this, Zopa Bank will be buying your entire loan portfolio at current face value without any of the fees you’d normally pay for a loan sale,” the email reads.
The peer-to-peer loan sector has come under pressure from increased regulatory scrutiny and weakening demand from investors, placing pressure on firms to diversify their revenue streams.
“Sadly, over the last few years, customer trust in P2P investing has been damaged by a small number of businesses whose approach led to material losses for customers investing in those platforms,” Wear explained.
“Linked to this, the changing regulation in the sector has made it challenging to grow and remain commercially viable. We’ve therefore decided to fully focus on Zopa Bank and we will be closing the P2P business with effect from 7 December 2021,” the email read.
Moreover, the pandemic meant a sharp increase in defaults, combined with the 3 to 6 month holidays given by the government, put into legislation, leading to invested parties struggling to break even, let alone make a profit.
“We’ve informed our regulators, the FCA, of our decision,” Wear stated in the email.
Zopa obtained its banking license early last year and launched its bank in June of 2020.