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Post by easteregg on May 19, 2015 21:28:32 GMT
Zopa announced today that they have entered into an agreement with Metro Bank, so that Metro Bank can lend funds on the Zopa platform. I have several views on this, but I wanted to gauge various opinion on this.
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james
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Post by james on May 19, 2015 23:06:41 GMT
Just more of Zopa proving that three risks of P2P aren't merely theoretical:
1. conflict of interest between platforms and lenders 2. the importance of lenders setting rates, not platforms 3. competition between retail and institutional investors harming retail
In this case we again have another source of institutional money that Zopa will use to meet borrower demand instead of having interest rate supply and demand between retail borrowers and retail lenders set the rate.
It's good news for their retail lender competitors because it will keep their interest rates for lenders low.
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Post by davee39 on May 20, 2015 10:56:57 GMT
I would rather earn 5% from a solid and profitable platform than a higher rate from a non profitable one which may be at risk of failure.
Zopa recently exhausted individual lender funds in the longer queue and is relying on institutional money to grow lending significantly.
The 'set your rate' model was not working (time to get money loaned was excessive) and I not perturbed by the latest development.
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james
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Post by james on May 20, 2015 13:53:12 GMT
The 'set your rate' model was not working (time to get money loaned was excessive) and I not perturbed by the latest development. At the time they changed model there was an excess of lender supply vs borrower demand. That was the reason for the delays, not the set your rate model. Though someone with a high desire to lend could just have reduced their rates to end up included in most loans, increasing their chunk size also if needed. One of the things that Zopa did well at that time was not relaxing lending standards to a noticeable degree. At least one other one did and also entered new markets that have in one case produced default rates of around 80% - Bondora in Slovakia. No announcement about it but a while back lending in that country stopped. The pressures from lender demand and desire/need to move towards growth and an IPO or trade sale exit strategy to reward financial backers can produce unpleasant results sometimes. For all the assorted issues, Zopa has avoided some of the worst of the possible results.
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Post by Deleted on May 21, 2015 11:21:04 GMT
The rates at which we lend at are determined by demand in the personal loans market with shifts by Zopa and our competitors to stay competitive on loan price. I remember two years ago a typical rep APR was above 5% and we have seen it as low as 3.6%, now we are offering 4.8%, this means our lending rates can go up and down depending on what is happening externally, these rates are then passed on to lenders. We obviously want to provide you (our lenders) with the highest returns possible but this depends on the demand from our borrowers which is very high at the minute and the level of risk we are willing to take as a business based on their Zopa credit scores. Zopa has typically attracted very high credit worthy borrowers meaning the majority of our loans are in our A* and A1/A2 markets which make up a lenders' blended return. This has been reflected in Zopa having reliable and predictable returns averaging 5% as well as the lowest and most consistent bad debt levels of any P2P platform in the UK and even the world. It all comes back to risk/reward ratio. At present we are matching more loans than ever before as last month we lent £45.4m (A UK record). With borrowing demand outstripping lending demand we still need to provide our borrowing customers an excellent, simple and fast service which requires liquidity to match them a loan. This is where institutions like Metro Bank help by plugging a liquidity gap when borrower demand is higher than individual funds on offer. We will of course continue to prioritise retail funds in our lending process and as individual funds increase and come in they will make up the majority of our lending. We also see the partnership as a great stamp of approval and trust in Zopa. Metro Bank has done vast amounts of due diligence on our loan book, credit decision model and underwriting process, and is very happy to commit its funds through our platform to our borrowers, which in turn helps lots of families and people finance cars, home improvements and pay down expensive credit card debts. Our priority is building a long-term low risk lending business for consumers that doesn't compromise on credit quality, and partners with the best businesses like Metro Bank to help Zopa grow into a household name for personal loans and lending returns. I hope that helps provide some answers to the comments above and if you would like more info on the partnership then you can read the full release below with both CEOs' comments. cdn.zopa.com/pressrelease/2015/zopa_partners_with_metro_bank.pdf Thanks, Mat
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james
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Post by james on May 22, 2015 12:01:10 GMT
Mat,
What is the source of the funds that Metro Bank will be lending?
I'm assuming at the moment that it will be taking deposits from its customers and lending that money via Zopa. That is, I'm assuming that it will be doing exactly what disintermediation of P2P was touted as preventing: banks making a profit on the interest rate margin between deposits and lending. Or put somewhat differently, instead of cutting out all of the middle men but Zopa, in the case of metro Bank customers Zopa's now apparently helping the middle men as their servant.
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ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on May 22, 2015 12:18:07 GMT
Mat, What is the source of the funds that Metro Bank will be lending? I'm assuming at the moment that it will be taking deposits from its customers and lending that money via Zopa. That is, I'm assuming that it will be doing exactly what disintermediation of P2P was touted as preventing: banks making a profit on the interest rate margin between deposits and lending. Or put somewhat differently, instead of cutting out all of the middle men but Zopa, in the case of metro Bank customers Zopa's now apparently helping the middle men as their servant. Ah, so Zopa is now the middle man's middle man. A challenger bank has now teamed up with the banks' challenger.
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Post by Deleted on May 26, 2015 8:13:08 GMT
Mat, What is the source of the funds that Metro Bank will be lending? I'm assuming at the moment that it will be taking deposits from its customers and lending that money via Zopa. That is, I'm assuming that it will be doing exactly what disintermediation of P2P was touted as preventing: banks making a profit on the interest rate margin between deposits and lending. Or put somewhat differently, instead of cutting out all of the middle men but Zopa, in the case of metro Bank customers Zopa's now apparently helping the middle men as their servant. James - You are correct, Metro Bank will be lending its deposits through Zopa and using us as part of its asset class portfolio.
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