Meet UK’s New Unicorn: Neobank Zopa Secures € 260.76m in SoftBank-Led Pre-IPO Round

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Zopa, a London-based digital bank that offers peer-to-peer lending at low rates, flexible terms and no prepayment fees, has announced that it has raised £ 220million (around € 260.76million). ) as part of a new round of funding to drive its next phase of growth. This is their biggest fundraiser to date, Zopa says.

With this investment, the company achieved unicorn status with a post-money valuation of $ 1 billion (approximately € 860.5 million), according to a report from Yahoo! Finance.

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The proceeds from this tour will help the company help more UK consumers improve their financial health and access loan and savings products.

Investors

The funding round was led by Softbank Vision Fund 2 backed by a number of existing investors including Silverstripe, Northzone and Augmentum.

Managing Director Jaidev Janardana told the Financial Times: “For us, the capital we seek to raise is to finance the growth of the balance sheet. The raised capital also means that we can be more flexible in our timing of an IPO. “

Janardana adds, “We think we’re ready (to be listed), but one thing I would love to have is a history of profitability before going public. The decision is to list in London, where investors are looking for a combination of profitability, strong unit economies and growth. ”

The earliest date for an IPO is the fourth quarter of 2022.

An app to help you manage your money stress-free

Founded in 2005 by Richard Duvall, James Alexander, Giles Andrews, David Nicholson and Tim Parlett, Zopa is a P2P money lending service that allows lenders and borrowers to deal directly with each other, eliminating banks as intermediaries. .

Zopa works by first categorizing borrowers’ credit scores through ratings. Lenders then make offers based on the amount and time period required for people with a certain credit score. Finally, borrowers can agree on the overall rate offered.

Zopa takes on responsibilities such as distributing the money between the parties, completing the paperwork, verifying the identity of the borrower / creditworthiness, and employing a collection agency that looks for the missed payments to the lender.

Zopa also reduces risk for lenders by enforcing monthly direct debit repayment, requiring borrowers to sign a legal contract, and allowing lenders to lend small amounts to individual borrowers (e.g. someone lending 1,000 £ would see his money spread over, say, 100 borrowers). Borrowers can take out loans between £ 1,000 and £ 25,000.

Zopa makes money by charging a fixed fee for borrowers and a 1 percent annual fee for lenders.

Securing the UK banking license

In order to offer clients a broader set of personal finance products, Janardana says: “In 2016 we first announced our plan to launch a fully regulated bank that would offer a different banking proposition to UK consumers. A proposal based on equity and which offers simple and transparent products. The company had secured £ 44million in funding for the launch of its digital challenger bank.

Zopa was granted provisional banking licenses by UK financial regulators, the FCA and PRA, in December 2018. Shortly after obtaining a full banking license, the bank was launched in June 2020.

Zopa’s bank offers FSCS-protected deposit accounts, credit cards and a money management app that uses data made available by the introduction of Open Banking.

Janardana adds, “We were able to build on our 16-year heritage of award-winning lending products to develop credit cards and savings that better meet customer needs, and we launched them shortly after obtaining our banking license in June 2020. the initial success of these products speaks for itself. Just over a year after our bank fully launched, we have attracted £ 675million in deposits for our fixed savings accounts and issued 150,000 British Bank credit cards, making us one of the of the top 10 credit card issuers.

The company has already reached over £ 6bn in disbursed loans this year and currently lends over £ 100m a year in auto loans.

Zopa has also partnered with ClearScore to offer a Zopa pre-approved credit card to previously declined customers. An integration with CreditLadder has also allowed tenants to improve their credit scores by reporting their rent payments. Additionally, the company launched utility switching services to help customers save money and increase their disposable income, a key factor in improving creditworthiness.

“We are focused on building a sustainable and profitable business model that works for our customers and shareholders. This is about to become a reality as we are on track to achieve profitability in the next 10 weeks, making Zopa one of the fastest digital banks in the UK, just 18 months after getting our full banking license, ”Janardana said.

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