As you are no doubt aware by now, Zopa has been around for 10 years. It has successfully weathered the credit crunch and the financial crisis, and now stands poised with the rest of the peer-to-peer lending industry to cross over into the mainstream.
But when it comes to any financial business, the figures are key.
So how has Zopa performed, statistically speaking, over the course of its first decade?
Well, the company has just passed £750 million in lending and expects to exceed the £1 billion mark this summer – a sign of just how quickly the market is growing at the moment.
Since 2005, Zopa’s 58,000 lenders have seen more than £46 million in interest returned. Total borrower numbers are now well over 107,000.
Giles Andrews, Zopa CEO and co-founder, says: “It’s hard to believe that we’ve gone from an idea in a barn to a global industry now lending billions of pounds in the course of a decade.
“We created Zopa because we saw the potential to bring people together over the internet without having to go through a bank. This has prompted a revolution in the financial sector worldwide.”
But while these headline figures are impressive, from an individual lender’s perspective they do not tell the whole story.
So what about the typical rate of return for users of the Zopa platform?
The company’s data shows that after fees and losses arising from bad debts, the average annual return has been 5.6% over the past 10 years.
This means that a £10,000 investment by a lender back in March 2005 would today be worth £17,000, 70% more, thanks to the power of compound interest.
In isolation that sounds like a reasonable achievement. But how does it compare with other asset classes?
If you’d put £1,000 in a typical savings account at the same time, it would have grown to £1,360 – just about enough to have beaten inflation over the course of the decade.
Even the property market hasn’t grown as fast: far from it, in fact. According to the Nationwide House Price Index, a home bought for £100,000 in 2005 would be worth £123,000 today, a strong illustration of the effects of the credit crunch and financial crisis.
The stock market has proved more resilient, however: the FTSE-100 has returned a total of 96% since 2005, with £10,000 invested then worth £19,600 today, providing dividends had been reinvested.
Given the risk profiles of cash savings, P2P lending and stock-market investment, perhaps these numbers reflect roughly the level of returns you would expect from a long-term holding.
The property figure, however, should act as a reminder that Britain’s housing market is not always the one-way bet that many people seem to think it is.
Of course, if you’d bought a home five or 10 years earlier, you would be sitting on much larger gains.
But for anyone who is planning to cash in their property to pay for retirement, for example, it is worth bearing in mind that the market at the time they want or need to sell may not be as buoyant as they hoped.