Zopa hiring for US launch

For over a year, Zopa has advertised that they are moving beyond the UK and will offer peer to peer lending in the U.S. Their website header contains an email form if you want to be notified of developments. For months there have been no emails. Until today.


In today's email Zopa announced, "We are in high gear on launching Zopa in the US" and are looking to hire great people. Specifically they are looking for a web developer, financial systems developer and an account manager. Here are the job descriptions:

• Web Developer - We need somebody to own, design, and build the presentation layer of the Zopa website in the U.S. So you'll need to be a sharp--even a C#--developer (and able to appreciate the odd bad joke). You'll need to be a great person in general, of course. But you'll also need to be a master of ASP.net, a core technology for us...
• Financial Systems Developer - We need a crack developer to work on the financial engine underneath our peer-to-peer lending system. This job is literally at the heart of everything we do, and you'll need to be a great person to wear the role well.
• Account Manager - Zopa is a financial service, and so we need some crack accounting folks. This position is a general accounting position with emphasis on reconciling our bank statements with our internal system of record.

Those interested in applying can send a resume to Zopa at jobs@zopa.com.

The peer to peer industry is in a significant growth phase right now. Prosper recently received $20 million in venture capital and announced they are expanding to Asia. Lending Club opened in the U.S. and is growing rapidly. Loanio and GlobeFunder are expected to open in the U.S. this fall. I've also found four projects on freelancing websites (ScriptLance, Rent a Coder, iFreelance, and GetAFreelancer) where people are looking for help to develop competitors to Prosper.

While competition seems to be heating up, Lending Club CEO Renaud Laplanche does not feel threatened by the other companies. In an interview with CenterNetworks yesterday he said, "Prosper is really the only other person-to-person lending marketplace available in the US at this point, but we do not feel competitive with them at all. Both Prosper and Lending Club can be very successful, and the success of both companies will be much more dependent on how fast we can grow the p2p lending space together rather than how well we compete against each other. With 2.4 trillion dollar in personal consumer debt (other than mortgages), it is a big market out there."

Asset diversification and P2P lending

I just came across an article written yesterday, Nervous Equity Investors Should Consider Zopa Lending, which argues that the time to invest in P2P lending is now based on market conditions. Personally, I'm not sure the P2P lending market is something you can time. However, the article does make a good point - P2P lending is a new asset class that does not move with the equity markets. Here are some excerpts from the article:

Wobbling stock markets and rising interest rates make now a perfect time for equity investors to reduce and spread their risks by investing in prime unsecured lending via Zopa.

Zopa (zopa.com) - the world’s first marketplace where people meet to lend and borrow money – says the current climate for private investors is creating the ideal time to consider lending on Zopa. As interest rates rise, markets are feeling a ‘credit crunch’ that is causing stock prices to fall – and investors to suffer. However, those same increasing interest rates have made lending on Zopa more attractive than ever, with recent rises helping the average return to lenders to pass the 7% p.a. mark. Some members lending to higher risk borrowers (but still very much prime market borrowers) are enjoying returns of more than 10% p.a.

....Giles Andrews, Managing Director of Zopa UK said, “Zopa lending has been attractive to private investors since we launched more than two years ago, offering far better returns than cash-based products but at only marginally more risk. With stock markets looking far from rosy currently and interest rates generally on the rise, Zopa lending has never been a more valuable alternative. Investors looking for safer and more secure returns on their money at rates well in excess of cash products should give Zopa a serious look right now.”

Others have made similar statements about how P2P lending is a whole different asset class. Prosper CTO John Witchel has said that Prosper is unique, "There is nothing like it in the marketplace and it is essentially a new asset class." Roger Steciak, who wrote Happy About People-to-People Lending With Prosper.com: How to Lend Money to Friends You've Never Met said, "I consider people-to-people lending to be a new asset class and I want to allocate a small portion of my net worth to it for diversification."

Matt, in his article about the effects of a recession on Prosper recommended, "...don't put all of your investment money into any one asset class. You should start with an emergency fund in something like a money market or savings account that can be easily accessed if needed for an emergency. Then any remaining money can be diversified among several different asset classes - stocks, bonds, real estate, foreign markets, and Prosper. The allocation percentages should be based on your risk tolerance and investment timeframe. The longer term (10+ year) money can have a higher percentage in stocks, the mid-term (5-10 year) money can have a higher percentage in Prosper, and the shorter term (<5 year) money should be mostly in cash accounts or bond funds."

What do you think? How much of your investment should be allocated to an asset class like Prosper? Should the amount allocated change based on market conditions?

Zopa makes top 10 UK startup list

The Guardian Unlimited announced the top 10 UK startups and Zopa, UK's peer to peer lending site, is number 9 on the list. According to the Guardian, "Driven by the surge of Web 2.0 sites and the widespread penetration of broadband, Britain's dot economy is growing fast and – for now at least – there are no real signs of a bust on the horizon." Zopa is among the companies leading this dotcom growth in the UK.

Although we have not written about Zopa much on Prosper Lending Review, we are watching them closely as they prepare to launch in the United States. On the main page they proudly announce, "Zopa is coming to the US: want a preview?" If you enter your email you will be notified when the preview is ready. Zopa also has a (somewhat quiet) discussion board for the U.S and they have published their first U.S. newsletter. Prospers.org has a much more active forum about Zopa. The provocative tagline: "Until we all defect to Zopa, one board should do it for now =)"


Awards like the one Zopa received from the Guardian are not unusual for peer to peer lending sites. Prosper was named Time Magazine's site of the year in 2006 and one of the top 50 sites of 2007.

Boston Globe features Prosper and competitors

The Boston Globe has a feature article about peer to peer lending - Need cash? Just ask. Zopa, Prosper, CircleLending, and Lending Club are all featured. Here's what the Globe has to say about each:

Zopa: A site launched by veterans of Britain's banking industry in 2005 to facilitate loans between strangers plans to launch a US service this year. Zopa.com already has 170,000 users, all of whom must pass the same kind of credit check they would undergo at a regular lending institution....Even if a borrower defaults, lenders won't take too much of a hit, because their money is lent out in increments of 10 British pounds, and spread among a number of borrowers whose credit ratings are acceptable to the lender. If one goes bad, the lender only loses a portion of his money. Dolton won't say exactly how many loans Zopa has made, but he said the company has had exactly two loan defaults in its history.

Prosper: ...was launched 16 months ago, using a lending structure similar to Zopa's. Already, Prosper.com claims 330,000 members and over $70 million in loans.

CircleLending: Zopa and Prosper are a bit unusual in that they arrange loans between strangers. Most peer-to-peer lending happens between people who know each other. CircleLending Inc., of Waltham, is the granddaddy of peer-to-peer lenders that tap into the "friends and family" market. CircleLending was launched in 2001 by Asheesh Advani, formerly of the World Bank...CircleLending has arranged about $210 million in loans so far, with about $150 million currently outstanding. CircleLending's default rate hovers below 5 percent, and less than 1 percent for mortgage loans.

Lending Club: For those who'd rather not borrow from friends, families, or strangers, there's Lending Club, a Sunnyvale, Calif., firm, launched in May in cooperation with the popular social networking site Facebook. Lending Club, which says it has already issued over $100,000 in loans, leverages Facebook's affinity groups. These groups, formed by millions of Facebook users, are built around shared interests -- attending the same college, for instance, or working at the same corporation.

A few things surprised me from this article. I was surprised to hear that Zopa has only had two loans default. Perhaps they are using some criteria to narrowly define default. For example, although many Prosper loans have defaulted due to late payments, only nine have defaulted due to bankruptcy.

I'm also amazed that CircleLending has arranged $210 million in loans. That's three times what Prosper has done. I had no idea they were so much bigger.

Update: Andrew from Prosper made some great points in the comments. For the benefit of those that only read the blog via RSS or email subscription I wanted to add his comment to the body of the post. He says, "Andrew from Prosper here. I like your commentary on the different stats, and thank you for the post. Here's my take on your points... First, Zopa's defaults are so low because they only accept the equivalent of AA, A, and B credit grades on Prosper. So the highest level of risk (and therefore reward) available on their market is lower by design. Second, CircleLending has made 3x the amount of Prosper loans, but considering that they started 7 years ago and Prosper started 1.5 years ago, Prosper is making loans at a 50% faster rate. Not to mention that Circlelending facilitates mortgage loans (which can be quite large), while Prosper's current limit is $25k."