Zopa vs Ratesetter

The vast majority of lenders do not like risk, self included.  In the early Zopa days I worried about every late payment, even though my notional return was 12%. Today most of my P2P is in RS, a good chunk in Zopa with FC rapidly shrinking. That is my risk profile and if I could get 5% in a protected account I would. To attract less sophisticated savers the simple provision fund model is essential. The problem with Zopa is that their implementation is inferior to RS. Furthermore they are struggling to grow their market and can take several days (or even weeks) to lend new deposits. RS, of course, would love to have sight of some of that backed up cash. 

There are still plenty of high risk, high interest offerings among the competition, but they appear to be aimed at the lower grade borrower and there is no significant third force among them.

As for RS I keep trying to convince myself that I have loaned enough, and then 6.8% flashes up and I am am lost...

This is spot on and along with the Governments cheap money for banks, is what forced Zopa to change.

I personally was with Zopa from the early days and although I found it totally fascinating, found it practically impossible to loan out a reasonable sum at rates I was happy with for the risk.

Everytime there was some drive at getting new lenders, new people would come in and offer at what I saw as unrealistic rates. This is because once you'd had your first default, you got the realisation that this wasn't "free money" so tweaked your rates upwards whereas new members were joining and pushing rates down.

By the time that I started to wind down my interest, I'd only managed to lend about £3K despite being active for about 3 years.

When they introduced SG, I took an active interest again because I didn't need to concern myself with rates and risk profiles. I was then able to lend out about £10K in a couple of weeks, 3 times what I'd managed in 3 years as an "active" lender.

Unfortunately for Zopa, they keep trying to mend a broken system and in doing so, appear to break it further.

IMO they need to go back to the drawing board and come up with a brand new Zopa if they wish to maintain their links with non institutional customers.

I don't disagree,
I'm sure they won't go back to the drawing board and therefore by my definition, don't wish to maintain their links with non institutional lenders.
I for one have not lent any money over there in more than a year now.

I put the exact same amount of my savings into Zopa and Ratesetter two years ago last month. Now I do not claim to really understand the complexities of the two platforms but my interest from Zopa stands at £2317 vs £3097 with Ratesetter.

Unless I am missing the point and Zopa are accepting a different class of applicant so the risk is greatly diminished the plain fact is that Ratesetter is outperforming Zopa by £780 per year using the same 5 year criteria and starting point.

Zopa have tried for a long time now to be top of the league table for low cost loans and there is the added bonus (if you should ever need it) of possibly lower exit fees. Call me cynical but once you allow institutions into the party room then effectively it's game over for genuine P2P with that platform. I doubt if any institution would accept some of the rates that Zopa pass off onto its lenders so no second guessing as to where the higher value loans are going.

Then there is the lending speed at Zopa which seemed to be okay until the latter part of 2013. The institutional involvement was announced a few months later but it wouldn't surprise me that as the lending speed suddenly nosedived for individuals but borrowing was healthy - draw your own conclusions or at least I did as to exactly when that institution became involved.

Once institutions get involved then I tend to take with an extra large pinch of salt the assuring statement(s) made by the platform owners about 'nothing's going to change' for us normals. It generally does. Either overall rates are lower or deal flow slows up - take your pick but things are never as they originally were even though the assurances keep on flowing like a stuck record.

If the boot was on the other foot and I was an institution (which I'm certainly not) then I would expect, or indeed demand the cream in exchange for a few million quid investment. That's how business operates.

Matt, you seem to like it around here. Do you want a job at RateSetter, I'll put in a good word. Or we could get a room.....

Interesting quote:

"Perhaps the most surprising observation about these charts, however, is the large increase in standard deviation seen in Zopa’s loan book over the last 2 years. The timing of this coincides with the introduction of Zopa’s Safeguard fund. This could indicate a change in lending strategy as Zopa attempts to maintain its pace of growth.

Those of you who are familiar with the rates that Zopa and RateSetter offer their lenders may be surprised to see Zopa’s mean lending rate higher than RateSetter’s, (as RateSetter currently offers lenders about 150bps more yield than Zopa on its 5yr rate). However this is explained when we look at the term of the loans which makeup the loan books with RateSetter’s loan book being weighted towards shorter term loans which will tend to have lower yields."

@westonkevRS