Zopa, which stands for Zone of Possible Agreement, is an online-based peer-to-peer lending firm taking the financial industry in the UK by storm. Since it was started in 2005, Zopa has experienced huge growth and was voted "Most Trusted Personal Loan Provider" by Moneywise in 2011, 2011 and 2012.
We chatted with Giles Andrews, co-founder and CEO of Zopa (and one of our featured interviewees in The Athena Doctrine), about what makes his company tick.
What inspired you to start Zopa?
I was part of the founding team. We were inspired by two main things. The first was the fact that corporations got a better deal out of financial services than consumers. Companies were issuing debts to the market and the bond market became massive as a result of trusted 3rd party data and the ready supply of funds from investors looking for a better and more predictable return. We thought, why couldn’t we create a bond market using data where savers could look for a better return than they could get from traditional bank savings. We wanted to create more efficiency and better value by taking out the middle man.
The second thing that inspired us was eBay. By 2004, when we were starting, they were the largest online market place in the world. You couldn’t explain that growth from value alone so we concluded that the difference was in their approach. They created a social and collaborative marketplace where people could be empowered by the trust between buyers and sellers, leading to social value as well as financial. Since then, social collaboration has exploded (in the form of social media platforms).
We wanted to offer a mixture of value and fun by offering a product with great value that allowed people to have fun through a social return from collaboration.
What does peer-to-peer lending offer that traditional banking doesn’t?
Much better value, a feeling of collaboration and a healthy dose of transparency. Social return also helps people, and while some people don’t care about that, most people are somewhere in the middle between looking for financial and social return. They are looking to help people and make a profit. There is also a lot of transparency in peer-to-peer lending. You know what you’re doing and what you’re getting. Neither of those are offered by banks.
Our study found that 85% of adults around the world agreed that there is too much power in the hands of large institutions and corporations. How does ZOPA allow people to take control of their own finances?
There is something slightly antiestablishment about it, like the little guys are getting together and taking the power away from big banks. Some customers prefer to deal with a small player. They do like the feeling of control with rates and lending terms.
How would you describe your leadership style?
Collaborative. It fits with a collaborative business. Hopefully there is hard work and good fun in there as well.
How do you see communication and transparency in your business model?
We like to say to people what’s going on and this is how it is, and not in a salesy way. It helps that our business model starts with transparency, but we also made a choice to be transparent. You can’t elect which day of the week you are transparent, it is a mantra you have to stick to. If you are consistently transparent it helps build trust, but its better to never be transparent than sometimes. In the UK, banks are going on about how they need to rebuild trust but they never talk about how they are going to do it. It’s almost as if it’s a pr exercise, and it makes customers cynical.
We don’t talk about wanting you to trust us, we just do things that lead people to trust us through transparency. Banks can’t do that, they don’t want you to know what they are doing with your money.
What values give ZOPA a competitive advantage over typical lending institutions?
Our economic business model gives us a massive advantage, it’s more efficient and takes cost out of the value chain and gives it to customers. There is also an interesting layer of company values around transparency and fairness, which wouldn’t resonate so richly in some industries but provides differentiation in the financial industry. As long as we continue to live it, we will continue to have a competitive advantage.