Exclusive: How Zopa transformed itself from P2P lender to award-winning bank in three years

Zopa Bank had an impressive 2022: it hit £2bn in savings, launched a range of new products, hit profitability and rounded it all off by being crowned Bank Of The Year 2022 at the AltFi Awards.

Fuelled by this strong growth trajectory and having managed to reach profitability — an achievement that often eludes fintechs — less than two years after winning its banking licence, Zopa rode into 2023 on a high.

It kicked off with a big £75m raise to be put towards mergers and acquisitions and picked up ‘buy now, pay later’ for DividePuy just a few weeks later.

While Zopa is hardly the new kid on the block — it was founded in 2005 — the pivot from successful peer-to-peer lender to ‘Zopa Bank’ in its current form happened just three years ago.

Now, the bank has reached one million customers using its products, an annualised revenue of £250m and is operating profitably. 

So how did it get there?

In an interview with AltFi, Zopa CEO Jaidev Janardana noted 2022 as a particularly strong year for the company which “laid the foundations” for the profitable growth that continued into 2023.

“As people in the UK continued to navigate through the cost-of-living crisis and rising interest rates, Zopa’s proposition became ever more relevant,” Janardana said.

“For borrowers seeking fairly priced and responsible credit or savers seeking to find the right balance between returns and access, Zopa offers a superior alternative to the incumbents.”

Customers saved on average 4.5 times more interest with Zopa than they would have at a high street bank last year, while the bank introduced a number of products to help users through the cost-of-living crisis.

These include a hybrid access/savings account last year, a machine learning model that enhanced its credit decisioning and a credit card balance transfer product.

“We will continue to make borrowing affordable and easier to manage, savings more rewarding and provide tools that can help customers to make better decisions for themselves for all their financial needs,” Janardana continued.

Strong Foundations

Buoyed by the momentum of its “exceptionally strong” 2022, and, of course, the accolade of being dubbed AltFi’s Bank Of The Year, Zopa completed the first half of 2023 with 53 per cent revenue growth.

It swung into the black for the first time last year, reaching an annual profit of just over £10m on an adjusted basis compared to an £11.7m loss in 2021, and has seen that continue through H1.

Now the bank is looking forward to deploying “even more innovative products” for its one million customers while also delivering strong results, Janardana said.

“Winning Bank Of The Year was a big achievement for Zopa Bank that supported our growth journey further; it is also a testament to the team’s hard work,” he continued.

Having launched a regulated BNPL product following the acquisition of DivideBuy and a new Smart ISA account, Zopa is hoping to hold onto the title for a second year running.

“Amidst the cost-of-living crisis, our proposition, built around fairly priced credit products and attractive savings returns delivered through a transparent and world-class digital experience, has never been more relevant,” Janardana said.

An Exciting Journey

The fintech remains open and “sector agnostic” to future acquisitions to bolster its offering and continue its growth trajectory.

“While we don’t have something official to announce just yet, our mergers and acquisition strategy is focused on identifying and evaluating a wider pool of opportunities in different sectors that support inorganic growth,” Janardana said

“We are looking at a variety of targets that could help us accelerate customer growth by acquiring a large active customer base or could help us acquire incremental capability in the lending space or through new distribution channels.”

With a focus on “good customer outcomes” and “strong unit economics”, Janardana sees the bank as well positioned for M&A.

And humouring the other unavoidable question for Zopa at the moment — this time on the topic of IPOs — Janardana emphasised the importance of timing.

“We see the IPO as a milestone of an exciting journey, not as its final destination,” he explained.

“We still plan to IPO and can be ready in a short time, however we will not be rushed to make hasty decisions; we will wait for the right macroeconomic and market conditions.”

Fintech For Good

Alongside a bid to be Bank of the Year for the second year running, Zopa is throwing its hat in the ring for another category through the 2025 Fintech Pledge.

A collaborative venture between Zopa and credit marketplace ClearScore, the aim of reaching 10 million positive actions to help improve consumer finances in the UK by 2025.

These actions range from helping an individual use a tool to improve their credit score to moving their savings deposits from a low to a high-interest yielding account.

Already the Pledge has passed five million consumer actions, putting it over halfway to its goal less than a year since launching, and with nearly 40 fintechs and industry firms taking part to help tackle the cost-of-living crisis.

We will have to wait and see whether the judges deem the impressive results, and another strong year for Zopa Bank, enough to retain the crown at this year’s ceremony in November.

Nominations for the AltFi Awards 2023 are free and close at midnight 29 September 2023.