Social Lending Boom Or Bust


What is Zopa?

No, it’s not the latest group to hit the electronic music scene. Although you would never be able to guess from the name, Zopa is “the first lending and borrowing exchange.” In case you still have no idea what Zopa does, it’s basically a way for people to borrow money from complete strangers or lend money to complete strangers. As the homepage touts, it’s a way to “cut out the banks by borrowing at Zopa.” I like to think of Zopa as Web 2.0’s alternative to hassling your family and friends for a loan.


Who uses this web site?

As you can probably infer from the description of Zopa, the web site appeals to two groups of people: borrowers and lenders. Unfortunately, you can’t get any specific details about each group, but if I had to guess, I would say that the borrowers range from the driven entrepreneur to the last resort debtor, while the lenders most likely range from the overly compassionate to the shrewd businessman that is sick of the dismal returns on bonds.

Where is Zopa available?

Unfortunately, if you are reading this wonderful review from a computer in the United States, you won’t be able to actually use Zopa. Currently, they are only available in the United Kingdom, and although their homepage states that they have plans to make their service available to the United States, there is no information about how soon (or long) this will take. However, if your inbox isn’t already cluttered with enough emails, you can sign-up for the Zopa mailing list and be notified as soon as their service is available in the United States.

What kind of funding has Zopa received?

Zopa has gone through three rounds of fund-raising. Here’s the
breakdown of each effort:

Round One: Unknown
Round Two: $15 million; announced on March 30, 2006. This round was
intended to help them come to the United States (hasn’t happened) and
compete with Prosper (see below and decide for yourself).
Round Three: $12.9 million; announced on March 19, 2007. Apparently,
they needed another round of funding to accomplish the goals above
(which, by the way, still haven’t been completed).

Do they have any competitors?

Although Zopa is the only service of its kind in the United Kingdom, when they do finally make it to the United States, they are going to have to go head to head with Prosper. Here’s a quick breakdown of the main differences between Zopa and Prosper:

Design: Zopa definitely wins this category.

While Prosper looks like it was designed in 1998 (it’s definitely better than Craigslist, but it still doesn’t have anything special going), Zopa appears to have been created by a web designer that followed the “Official Step- by-Step Guide to Making a Web 2.0 Web

Site.”Function: In my humble opinion, if Zopa wants to compete with Prosper, they’re going to have to take some pages out of the Prosper play book. Although Prosper may not be as pretty as Zopa, they do an extremely good job of connecting borrowers and lenders on a personal level. While Zopa only allows lenders to choose borrowers based on categories of credit rating and the length of the loan, Prosper allows its lenders to surf through individual profiles and choose individual people that they would like to give a loan.

Security: When it comes to evaluating borrowers, Zopa is much more rigorous than Prosper. While Prosper only collects the basics (social security number, bank account, income level, drivers license, and credit score), Zopa goes above and beyond to screen the people they allow to borrow money (this could be anything from evaluating their business model to making a phone call to an employer reference). Because of their stringent requirements, Zopa is able to boast an impressive 0.05% bad debt rate.

We won’t be able to really compare the companies until Zopa actually makes their move to the United States, but to satisfy your curiosity in the meantime, here are two graphs which compare their traffic volume over the last year:

Alexa reach compared

compete reach

Note: Although Alexa and Compete both collect data about Internet traffic, they each use different means to collect their data. Therefore, it’s important to look at both graphs to find any discrepancies. However, since Prosper dominates Zopa in both graphs, the previous point is moot for this specific situation.

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