Zopa passed the £1 billion mark in terms of cumulative lending on Tuesday, according to the Liberum AltFi Volume Index. The platform thus becomes the first UK/EU based platform to conquer the £1bn milestone. Zopa’s growth rate has sky-rocketed since the start of 2015. For perspective, consider that the £52.2m lent by Zopa in a record-topping July is more than double its July 2014 origination total (£23.5m). The platform expects to lend around £550m in 2015, again more than doubling the £265m that was originated over the course of 2014. That £265m figure has already been surpassed, with Zopa currently sitting on a year-to-date volume of £290m.
What is driving this rapid rate of growth? In part, an increase in institutional capital flows, according to AltFi Data. A recent study of the Zopa loan book showed that 56.3% of the loans originated by Zopa in July 2015 were funded by institutions. That’s a striking uptick. For context, Zopa reached new highs in April this year in terms of institutional funding volumes – with 43.5% of its monthly origination volume going to corporate investors. With July's lending less than 50% funded by retail money, just how high will institutional flows on the Zopa platform climb?
One factor that may serve to rebalance the platform’s institutional capital usage is the impending advent of the Innovative Finance ISA (IFISA). The promise of tax-free returns is likely to considerably swell Zopa’s already impressive lender base, which currently stands at 61,000 strong. The platform has returned a grand total of £57m in interest repayments to its lenders in the past decade.
The Power of the Over-55 Crowd
Zopa has ushered in the £1bn milestone with a study that reveals the vital importance of those over 55 years old to the UK P2P space. A massive 57% of the funds that have been lent via the Zopa platform to date have come from the over-55 crowd. The relaxation of pension legislation in the UK, which came into effect in April, has left the many P2P lenders positively giddy with excitement.
Indeed, Zopa Co-Founder and CEO Giles Andrews told the FT in January that the change to pension rules was “potentially as big for our business as the ISA.” That quote was prompted by the news that Zopa was busily constructing a uniquely flexible new product for the nation’s pensioners, who are no longer required to purchase an annuity upon retirement.
According to Zopa research, pensioners have already been taking advantage of their increased freedoms. The platform commissioned an online survey of 2,007 UK-based over-55s in late July, discovering that, of those that had pensions additional to the state pension, 31% had already cashed in either some or all of it. Another six percent indicated that they planned to do so in the future. Ten percent had extracted the maximum tax-free lump sum of 25%. The average sum withdrawn was £36,500.
Of those hefty chunks of cash, the Opinium Research survey found that large portions were destined for consumer spending. Forty-nine percetn of over-55s said that they do not struggle to fund lifestyle purchases. In the 65-69 age range, respondents indicated that they considered 27% of their income as “disposable”.
Zopa boss Giles Andrews commented:
The ‘silver pound’ has never been stronger. Fifty-seven percent of the £1bn lent by Zopa over the past decade has come from over-55s, a clear sign that P2P is fast becoming a mainstream for people looking for income or to grow their pension pot. Savvy consumers in this age group have greater freedom to use their disposable income with many looking for a reliable, predictable and low risk return to generate an income from their pension funds.”
Perhaps more importantly, a survey of existing Zopa lenders revealed that 28% of the platform's over-55 year olds would invest more money via P2P platforms as a result of the changes to pensions rules. Furthermore, two thirds of the platform’s over-55s said that they would choose P2P over a more traditional annuity scheme, and over 75% would be willing to channel more money into the Zopa marketplace once the era of the IFISA begins.
It’s easy to see why peer-to-peer platforms all over the country have been licking their lips over the pensioner income opportunity, and indeed why so many have been so actively tailoring their propositions to suit a more silvery haired set of customers.
In terms of keeping pace with all of this investor demand, note that Zopa has serviced a grand total of 146,000 borrowers to date, and is now aggressively (and somewhat humorously) advertising on mainstream media, in an effort to expand that community. The platform has also been busily striking origination partnerships with like-minded companies, such as Uber and Flowgroup.
The £1bn milestone represents a decade worth of pioneering graft, grit and invention. Mr. Andrews, who has been on board since the platform’s inception, weighed in on the achievement:
Our rapid growth reflects the better value Zopa offers consumers. Zopa is a trusted service for over 200,000 people who are looking to borrow or grow their money. We’re delighted to have lent over £1billion and will continue to deliver the best service across consumer finance as we aim to lend our next £1 billion in 2016. I’m proud that over the past 10 years Zopa has established itself as a trusted and mainstream service for UK consumers.”
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