Fintech/Interview/

Zopa’s CEO on becoming a bank and hitting profitability

It's the ultimate milestone in fintech circles, but what does it take to reach it?

By Amy O'Brien

Zopa started life as the world’s first ever peer-to-peer lender in 2005. In 2020, the company announced its intention to move away from P2P lending and secured a banking licence.

Fast forward 21 months and Zopa has transformed into an extremely rare fintech breed: it’s hit profitability — and is only the second challenger bank to do so, after frontrunner Starling.

So, how exactly has Zopa managed it? Sifted sat down with CEO Jaidev Janardana to find out in a recent edition of our weekly Fintech newsletter.

What’s driven up profitability?

We’ve had a very strong 2021. I think what is different with us, compared to a lot of the other neobanks, is the fact that we are focused on people’s borrowing and savings needs. We can make a bigger impact on customers’ lives through that, and it is also a far more monetisable model: we get interest revenue as people borrow from us.

And over the last year and a half we’ve seen that the need for digital responsible credit, as well as good alternative savings opportunities, has increased. So we’ve really benefited from the capability we have built there. This focus helped us create a more sustainable business that is profitable, faster.

How much have you grown since you pivoted from P2P lending to banking?

We grew revenue by about 130% last year and we expect to more than double it again this year. We’ve now turned a profit of under £1m. We’re a touch under 1.5bn loans on the balance sheet now, and we crossed the billion mark for deposits earlier this year. We expect to double the amount of deposits again over the next 12 months — people like our competitive rates, particularly at a time like this. In terms of customer numbers, despite having been around for some time, we actually grew customer numbers by about 60% last year.

At your last raise you spoke of profitability as the benchmark for an IPO. Is that still the plan?

From a business standpoint, it’s great that we are profitable, and we expect to continue to be profitable going forward on a quarterly basis. This was one of the things I wanted to make sure we did before we went public. But our business is well capitalised and we don’t need to be in a hurry — we have the support of existing investors who could give us more runway if we need it.

So it really depends on market conditions. We live in an uncertain world right now. The IPO market has dropped dramatically this year, and we will just have to monitor how those things change. We’re lucky to have flexibility to choose the right time, and it’s hard to tell when it will recover. It’s more of a watch and wait.

Would you still prefer the UK over the US for a listing?

We would like our listing to be in London. We’ll have to make the right choice for the business as and when the time comes, but we are a UK business focused on UK consumers. And I think there are some good things happening in the UK that will make it easier to list here.

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