Zopa, a British digital bank, announced today that it has raised $300 million (£220 million) in a latest fundraise, to propel its next phase of growth. The funding round was led by Softbank Vision Fund 2, and had the support of a host of existing investors including Silverstripe, Notthzone, and Augmentum. The fundraise is Zopa’s largest so far, and it brings the company to a valuation of $1 billion. According to Zopa, the newly secured funds “will further support our plan to help even more UK consumers improve their financial health and access great borrowing and saving products.”
With about 500,000 users in the United Kingdom, Zopa provides peer-to-peer lending, savings accounts, credit cards and other services. And unlike other neobanks, Zopa’s banking services focus on a savings account, which complements its loan and credit products.
Founded in 2005, Zopa claims to be the pioneer developer of peer-to-peer lending. The funds given out in peer-to-peer lending are sourced not from Zopa’s deposits as they might be in a traditional bank, but from a network of individual retail investors and institutional investors, who are banking on Zopa using better algorithms and other technology to ensure that they’re lending to people who are more likely to pay back what they borrow. This was the company’s major focus, until 2016 when it announced plans to launch a fully regulated bank that would provide a different banking proposition for the UK.
Four years later; in June 2020, the company got its license to operate as a bank, and in just over a year on from fully launching its bank, Zopa claims to have attracted £675m in deposits for its fixed savings accounts, and issued 150,000 British Bank Award-winning credit cards. The company also boasts of a “Borrowing Power tool” which allows customers to see all of the Zopa credit options available to them, alongside specific actions on how to improve their eligibility and annual percentage rate (APR).
In the opinion of Chief Executive Jainav Janardana, the latest investment is a validation of the successful launch of Zopa’s banking service. “SoftBank identified us as the clear leader when it comes to digital consumer lending in the UK, and they are also big believers in the use of AI and machine learning for lending and pricing, which we have been doing for years,” Jainav Janardana said.
SoftBank’s big infusion of cash in Zopa is the latest in a series of investments into British fintech startups by the Japanese conglomerate. For Zopa, its new valuation puts it on track for a long-mooted initial public offering in London as soon as the fourth quarter of next year, Jainav Janardana said. He revealed that Zopa also has plans to expand into the booming “Buy Now, Pay Later” sector in Britain.
The investment deal was announced as part of the Global Investment Summit (GIS) 2021, which is aimed at attracting investments in the United Kingdom.