‘Lenders’ category

Regulators should view money the way consumers want to use it

Posted by Simon DJ at 1:51 pm

Simon Gleeson of Clifford Chance has written a very concerning overview of the shortcomings in the Financial Services Authority’s review of how the retail financial services that it regulates are distributed to consumers.

He suggests that the proposed three tiers of advice, coupled with EU-driven changes to the test of what is appropriate, will increase the cost of products, leaving the “mass market” with only the Sunday newspapers to help them invest. Which means they won’t.

To be fair, the FSA says it has an open mind on the proposals, and the initial consultation doesn’t end until December.

The most troubling aspect of the review is that it proceeds from the perspective of whom and what the FSA regulates, and not in terms of how consumers want to use money. For example, there are no representatives of the consumer credit industry on the panel tasked with reviewing ‘consumer access to financial services’. As consumers, we don’t think about who is regulating the different ways we use our money. We just expect it to be able to use it as we wish, without complex, artificial or costly barriers being placed in our way.

There is already very little focus on providing more usable, transparent and cost-effective financial services from the consumer’s standpoint, because that would seriously impact bank profitability that is already under pressure. For example, according to Uswitch, figures for RBS Group, as at March 2007, showed that retail profits rose 1.5% (about 25% of group profits) against a rise of 14% in retail write-offs (69% of all write-offs).

Witness also how UK banks have actually gone to court to defend fees that consumers and regulators have long complained are too high; and their grudging agreement to speed up electronic payments, only in the face of competition inquiries.

Of course, over the past decade consumers have seized upon usable Internet technology to disrupt traditional supplier-determined experiences in travel, music, retailing, betting/bookmaking, games, telephony, TV and so on. Social lending and micro-finance are established elements of this rapidly evolving trend, which will surely reshape banking, insurance, asset management and pensions in due course - provided that regulation does not get in the way.

For a further catalyst, look no further than the current credit crisis. The inability of banks to understand who owes what to whom so that they can confidently lend to each other again is illustrative of how badly transparency is lacking. The savers’ run on Northern Rock shows that consumer feel it too, and are prepared to act when they consider that someone is less than transparent about what is being done with their money.

So it is now more critical than ever that the FSA views the financial services market not from the perspective of the institutions and products that it regulates, but in terms of how consumers want to use their money transparently and cost-effectively, and what is needed to help them do just that.

Posted in Non Zopa, General, Lenders, Legalese, Press, P2P, web 2.0, blogs, Finance | No Comments »

Opaque banking practices

Posted by Giles at 12:32 pm

Those doubting that we live in a ‘globalised’ world would do well to recognise that the Northern Rock mess of the last couple of weeks actually had its beginnings in the credit crisis in the United States.

Across the Atlantic, American lenders lent too much, too easily, to too many sub-prime borrowers. Rather than savers’ deposits, this aggressive lending was funded instead by lenders packaging up loans for sale to banks and other financial businesses, making a profit in the process.

As the lending carried on and interest rates rose, it wasn’t long before this apparent gravy train came off its tracks. Some sub-prime borrowers found themselves unable to service their debts and defaulted, on a scale large enough to cause the collapse of a number of the lenders involved.

So started the credit squeeze. And with the world as interlinked as it is now, the effects were not restricted to the US. Books of dangerous US loans had been bought by firms on this side of the pond as well – and so American sub-prime bad debt issues started to bite right here in the UK.

All this may still seem a long way from the Northern Rock. However, even though Northern Rock was not really lending to the UK sub-prime market, it was using the same ‘never never land’ technique to fund the lending it was doing (and it must be said at some very aggressive interest rates). This meant selling these loans to the same firms that had burned their fingers in the US sub-prime market. Before long no-one wanted to buy, and especially at the prices Northern Rock needed to make their margin on the low rates they had lent at.

Inevitably the crisis hit the media. For the general public, explanations involving the knock-on effect of the American sub-prime bad debt crisis seemed far-fetched, then deeply worrying. “What’s all this about Northern Rock lending out money it didn’t have? And the banks lending between each other? What about UK sub-prime? What the Hell is going on around here?”

The public had always thought that banks lent out the money their borrowers deposited, and made money by charging more interest on their loans than they paid out to their savers. A kind of self-supporting mechanism that seemed to make sense, even if people had become cynical about the profiteering games banks play as rates move around.

It’s old news that most people don’t believe banks operate in their customers’ best interests, and many believe their profits are excessive. But the public had always regarded the banks as safe. Now it turns out they may not be after all.

Worse still, the man on the street can’t actually assess how safe or otherwise they are. The way some of them operate is impenetrably complex, and seems almost deliberately so. People might have become used to hidden catches in the small print, but now they are faced with potentially much bigger problems, hidden away in the banks themselves.

All of this naturally filled the news media with huge scary headlines. Coming in on the recent memory of the Equitable Life fiasco, and company pension shortfalls, Northern Rock’s customers understandably panicked.

Reassurances from the management of Northern Rock were disregarded as swiftly as you’d expect. Similar words from the Government seemed to fan the flames of nervousness and doubt rather than help. In no time huge queues formed outside Northern Rock branches as customers demanded their hard earned savings.

Billions of pounds of withdrawals later and finally the Government and Bank of England stepped in to guarantee the deposits left in Northern Rock. The whole thing looks rather a mess. The ‘blame-fest’ has only just begun…

The banking industry is now left licking its wounds and trying to move on. But its reputation has suffered a real beating. It was regarded with suspicion by many people before. Now it has even greater issues to address if it is to rebuild customer confidence.

In order to rebuild trust, banks will have to become radically more open and transparent. And this means some of the more exotic and opaque practices - like those that caused Northern Rock’s crisis - may have to be consigned to the City’s bin. This may leave some banks struggling on the road back to reality.

Meanwhile, back at Zopa, the last few weeks have served to shed new light on the appeal of Social Lending. Since we launched we have been proud of the innovative way we have created for people to bypass banks and get a better deal directly from each other. And we have done this by lending responsibly, and not to the sub-prime market. This can be seen from our default levels of below 0.1% across all of our lending.

We have also long been proud of our transparency. From very simple, and low charges, through to letting our members see who they are lending to or borrowing from.

But the last few weeks have also highlighted another key attraction of Zopa’s operation - ‘tangibility’. It is easy to see exactly what is going on. People are borrowing and lending between each other, with Zopa making it much safer and easier to do. There’s no highly paid City Slicker buying and selling futures, derivatives, Bizarre Bonds or whatever to make Zopa happen.

Maybe this clarity and simplicity will be our most attractive feature going forward – along with the great rates, of course.

Posted in Non Zopa, General, Rates, Lenders, Press, P2P, Finance | 2 Comments »

Lender returns at Zopa

Posted by Giles at 4:17 pm

There has been much talk on our discussion boards about lender returns at Zopa and how we calculate them.

Zopa loans are capital and interest loans – with borrowers repaying an amount each month that is partly a repayment of a portion of the original loan, and partly the interest accrued on the remaining outstanding loan since the last payment was made.

Let’s assume a lender lends £100 to an individual borrower at an interest rate of 8% over 1 year – a perfectly realistic occurrence at Zopa.

Now, because Zopa loans are capital and interest, what is actually being repaid by the borrower to this lender each month is a portion of the £100 and an interest charge of 8% on the outstanding balance over the last month. Each monthly payment by the borrower to the lender in this example will be of £8.69. In the earlier months the proportion of this amount that is interest will be higher, and will get smaller over the period of the loan as the amount of the outstanding balance gets smaller with each payment each month.

So throughout the loan, interest has indeed been paid at 8%, but because this has been on a reducing loan balance, it can end up looking like a lower rate. In this example for instance, if you add up the twelve payments of £8.69, you end up with £104.28 – and thus the appearance of a return of just over 4%, not the actual 8% that was being charged in interest.

But looking at it more closely, the full £100 was not earning interest for the lender for the full year, but rather interest was being earned on a reducing sum, which over the year averages something like half the original loan amount, around £50.

This is how a loan at an interest rate of 8% can end up looking like a loan at 4%. It’s all down to the fact that it is a capital and interest arrangement, not interest-only.

Those lenders looking to receive an actual return of 8% on their £100 obviously need to take steps to keep their £100 loaned out, to counteract the effect that a capital and interest arrangement has in terms of its gradually reducing outstanding loan amount.

The easiest way to do this is to select our ‘auto re-lend’ facility. Here, as the borrower makes his payments each month, they will be automatically offered again on the same marketplace (same risk category and term) and at the same interest rate.

The net effect of this re-lending, assuming the money was taken up straight away by another borrower, would be an ongoing return of just over 8% (as the interest part of the monthly repayments would be slowly increasing the amount the lender has lent out beyond the original £100).

In reality there is likely to be something of a lag in the take up of these automatically re-lent amounts by borrowers, depending on how competitive an interest rate their offer is at the time. But, do remember though that before the money is re-lent, it will be sitting in your holding account (on offer again, in processing or even pending you offering it back on the markets) where it will be earning interest, currently 5% (and tied to Bank of England base rate). This will serve to help mitigate any loss of interest during the time before the money is taken up by borrowers again.

There are very significant advantages associated with the capital and interest model that Zopa uses.

Lenders enjoy a more sensible pattern of interest and repayments – larger, level amounts over the term of the loan – rather than tiny payments of just interest each month and then one big repayment of the original loan amount at the end of the term as they would under the interest-only alternative. In other words, this minimises the amount of money that has to be re-lent at any one time.

Perhaps more significantly, borrowers benefit from a more sensible repayment pattern of ‘equal instalments’ with the loan reaching nil by the end of the term. Under an interest-only arrangement they would be faced with suddenly having to repay the full original amount in one payment at the end of the term, radically increasing the chances of default. This of course would hurt not just the borrower, but also the lender.

Posted in General, Rates, Lenders, P2P, Finance | 3 Comments »

Zopa And Conduits

Posted by ThomasB at 5:43 pm

You might have seen a lot of news in the broadsheets about problems with American sub-prime mortgages. In the last few years it was very easy to get a US mortgage despite a poor credit history. Many borrowers took on loans they couldn’t handle, and the recent drop in American house prices left them in negative equity. As dollar interest rates rose, they weren’t able to refinance and were forced to default.

Countrywide is America’s biggest mortgage broker. Right now, 20% of their sub-prime borrowers aren’t able to make their monthly payments. As the problem becomes more visible, reports of mis-selling and deceptive sales practices are surfacing. Brokers seemed to have failed miserably in explaining the risks of complex mortgages, like Option-ARMs, which can only be properly valued with the use of interest rate volatility curves. (I don’t really understand my last sentence either.)

If these problems only affected poor Americans, the press here probably wouldn’t have noticed. (Genetically they won’t leave Zone 1 without being bought dinner!) But it’s not just US institutions that are suffering. As I blogged about before, the majority of loans are not owned by the institution that originally contracted them. The beneficiary of a Countrywide borrower’s payment’s will often be an off-shore trust, which in turn distributes those payments to its bond and share holders. Countrywide are just collecting cash and answering phones.

The ultimate lenders to these unfortunate American home buyers are a picture of financial globalisation. They range from Scottish pension funds, through French hedge funds, all the way the state banks of the People’s Republic of China. The FT made a handy world map of losers, rather than listings them all!

In my last blog post I said that it was sort of possible for cash deposits to fund things like mortgages, but it was complicated. Well, complicated doesn’t really put off investment bankers (and good for them too), especially not Barclays.

This is how it works. Commercial paper is a form of short-term bond. It’s sold by a highly credit worthy institution to money market funds and banks. (Banks buy them to back your ISA.) Typically it will be a promise of a single payment after 90 days. Commercial paper can be rolled over, so that the principle payment is funded by issuing fresh paper. The fresh issue might attract a different interest rate to the old issue depending on the market. Rolling over commercial paper is a very flexible form of variable rate borrowing. A bit like an overdraft for billion dollar companies.

Instead of just selling bonds and shares to fund their loan portfolios, our off-shore trust might issue commercial paper as well. If the trust’s portfolio consists of credit card debts, or variable rate personal loans, payments on the commercial paper will match the returns of the portfolio. Higher base interest rates will push up commercial paper rates in parallel with credit card rates.

Trusts that are mostly (or entirely) funded by commercial paper are often referred to as ‘commercial paper conduits‘. They act as big pipes. Sucking cheap money from the commercial paper to pour into more profitable markets. A conduit is typically created and sponsored by an investment bank. The conduit is an independent(-ish) entity, the bank just provides it with services. If the conduit goes under, the bank isn’t liable for the losses.

Commercial paper is supposed to be very very safe. If there are any doubts about an issuer’s credit they might not be able to sell their paper at all. So, what happens if our squillion dollar trust of defaulting sub-prime mortgages can’t roll over it’s commercial paper? The same as any business with a payment problem. It arranges an overdraft with its bank. A sensible business will have a pre-arranged overdraft to cover crises.

The conduits were sensible, so a lot of banks are finding themselves obliged to extend billion dollar overdrafts. Barclays extended a loan of $1.6 billion to Cairn High Grade Funding last week. (Barclays also took an emergency loan from the Bank of England, but claim this was just to cover a failed money transfer.)

Since the UK enjoys a higher burden of personal debt than the US, there’s real concern that their crisis will spread our way. Even if securitization is less common here, our banks are still exposed to losses from US sub-prime. And every lender will have to raise their rates if the commercial paper markets stay nervous.

What does this mean for Zopa? It’s probably quite good news for us and our members. If banks start running out of money, or buyers for their loans, Zopa has less competition. The funds on our markets are raised from private individuals who are less susceptible to shocks than already indebted institutions. Plus, any really big financial disaster, like a retail bank going under, should make us seem more credible by comparison!

The wobbles echoing out from the US prove the unique integrity the Zopa platform offers. The assurance of a direct claim backed by a real person is more valuable to lenders than ever.

Posted in Non Zopa, General, Rates, Lenders, Finance | 1 Comment »

New toys

Posted by Dave at 10:45 am

We’re just putting in a new release - which has some long awaited features for lenders.

In ascending order of importance…

Firstly we’ve replaced the existing lending summary screen with a new ‘profit and loss’ screen - called the All Time Lending Summary. This shows all the credits and debits to your account since you started lending at Zopa, along with the total amount you have lent out and received back from your borrowers. This screen combined with the ‘balance sheet’ view of My Zopa Today should give you a complete high level view of your financial standing at Zopa.

Secondly, we’ve introduced a My Statement screen. This screen shows a very detailed breakdown of every single transaction on your account over the last 30 days, and allows you to download calendar months worth of data in CSV format. There are still a few little tweaks to make to this screen, so it’s officially still in beta, but we hope it meets the requests of lenders who have been asking for the most detailed view of what’s going on with their accounts.

Finally, we have Auto Relending - done properly this time! This functionality will allow all Zopa lenders to set up the automatic relending of repayments back into a specified offer. You can choose to relend into any offer that has not been withdrawn, although by default the relending will be activated into any new offer you make. Of course, you can turn it off by going to ‘Current Offers’ and selecting ‘Relend’ from the drop down menu - putting you in control of your repayments.

It’s worth noting that if you turn this feature on, and have more than £10 in your holding account, it won’t immediately relend that money - but the first time a new repayment hits your account it will place the existing holding account balance plus repayment (in multiples of £10) into your selected offer.

Hope you enjoy the new functionality - please report any problems on the discussion board - cheers!

Posted in Changes, New stuff, Lenders | 2 Comments »

Problems, problems…

Posted by Dave at 2:02 pm

We’ve got a couple of things going wrong at the moment - it never rains etc…

The discussion board has fallen over again - hopefully the people that run it will sort it out in due course. As I wrote on there yesterday, we’re looking to bring it in house, so in future, we’ll have more control over it, and these outages should reduce.

Having said that, we are having some problems with the My Lending pages - which are entirely under our control, so we’re not perfect either. Now up and running again!

We’re working on these right now - should be back to normal soon hopefully.

Posted in Lenders, Problems | 1 Comment »

Slow, slow, quick, quick, Zopa

Posted by Dave at 12:46 pm

Avid Zopa lenders might have noticed a slow down in their money being lent out over the last few weeks - so I thought I’d take a quick opportunity to explain what’s going on.

The reason for the slowdown is that the number of credit worthy borrowers applying to Zopa has dropped recently - as we’d expect it to in December. The loan business is highly seasonal with fluctuations in quality through the year, and December is the hardest month of the year to find good quality borrowers.

So, although you might be seeing things move a little slower than normal, it’s because we’re doing our best to look after your interests&and don’t forget you earn 4.25% on money that isn’t lent out all the time that money is at Zopa.

Now - the good news is that January is not only a new year, but a major turnaround in lending. January has something like double the borrower volumes of any other month - as everyone works out just how much they spent over Christmas, and wants to sort it out. And to make it even better, the quality of borrowers shoots up as well.

So - in summary, hang on in there, enjoy your Christmas and New Year, and get ready to lend in January.

Posted in Rates, Lenders, Borrowers, Credit scoring | No Comments »

Bad debt rates

Posted by Dave at 9:20 am

This is the third (1st and 2nd) in an occasional series of posts on credit and credit scoring.

I thought it might be interesting to show some data on how delinquent loans emerge over the life of an unsecured loan. Delinquent loans (also known as being in arrears) are those that have missed at least one repayment - all the way through to being written off.

The graph below shows, for a personal loan portfolio with an average life of 3 years, how delinquency develops over the life of the loans. The X-axis shows months since the start of the loans, the Y-axis shows the percentage of loans that are in arrears, as a % of loans in arrears after 60 months (At 60 months, all remaining loans are in arrears, so the value of the curve = 100%)

The basic shape of the curve will be the same for all terms and credit qualities - just the absolute level of arrears represented by 100% will differ.

Loans enter arrears at a pretty steady rate month by month, as a function of the credit quality of the loan book. Hence the first few months are a straight line. As the loan book matures, you find people coming out of arrears, and getting loans back on track, and the loan starts to flatten.

At some point, you get approximately the same number of borrowers entering arrears, as you do leaving, and the curve becomes relatively flat.

Eventually, delinquent loans get written off. When this happens is determined by the credit policies of the loan manager, but is typically 3 - 6 months after the missed repayment. This means that there is a considerable delay between the loan delinquency curve and the loan write off curve. It also means that most write offs occur towards the end of the loan term. For example, on a 3 year loan book, the write off chart will principally be over years 2 and 3.

By this late stage, many good borrowers have repaid their loans early (The average amount of time a good repayer holds a 3 year loan for is 18-24 months) and you’re left with an increasingly ‘bad’ book of loans - those that are in and out of arrears (pay one month, miss the next, pay up again etc.), and those who are already deep in arrears.

It is possible to project likely write offs from delinquent loans based on ‘roll rates’. These show what percentage of loans in a certain stage of arrears more to the next stage. For example, a typical set of roll rates for unsecured loans would be:

• 15 days to 1 month: 30% (i.e. 30% of loans that go 15 days late will move to being 1 month late)
• 1 month to 2 months: 50%
• 2 months to 3 months: 60%
• 3 months to 4 months: 75%
• 4 months to write off: 90%

You can multiply these through to calculate the final write off - for example, if £100 of loans are 1 month late, £20.25 is estimated to end up being written off (£100 x 50% x 60% x 75% x 90%) - so Zopa’s current level of arrears (c. 0.05%) is actually about 5 x the amount we’ll finally write off from the delinquent loans. Which we’re pretty happy with!

Happy to answer questions - either in the comments, or the discussion board.

Posted in Lenders, Credit scoring | 11 Comments »

A Zopa lender writes (Second guest blog!)

Posted by 1020990 at 10:54 am

“1020990″ is a Zopa lender, and an active member of the Zopa discussion boards. No one knows what the numbers mean - a bit like Lost.

So how did this all happen!? Last time I looked, which still seems to be a far too regular occurrence, I’d racked up over 100 posts about Zopa here having only been bitten by the bug a couple of months earlier. Maybe I should blame Cliff for ever having mentioned the idea over on the Motley Fool. Alternatively, it may just be true what they say about mad dogs and English men given the excess of summer sun in recent days - even though that doesn’t normally coincide with Wimbledon!

Either way, at some unwittingly altruistic moment I promised the resident Zopa blogger (Zlogger entry anyone?) a few words on subjects that must apparently relate in some way to Zopa or P2P activities. After all, despite his appeal, I think there’s only been 1 guest blog post – so that makes this at least the second best of all time guest blogs at time of going to press!

Given that my experience of P2P activities is limited to that of ZOPA the possibility of an earth shatteringly innovative article is somewhat unlikely! However, the question “What bits of Zopa make you go ‘Doh’?” has been previously asked, so I’ve hopefully pulled together a few of the major sticking points that Zopa lenders are currently operating as judge, jury and executioner on, on the lenders discussion forum. As new website releases are still coming through, we’ll hopefully be able to have an influence; however slight; on the tweaks which happen. After all, “great things are not done by impulse, but by a series of small things brought together”.

So with my IT knowledge limited to Excel macros and my biased position as a lender, I’m hoping the small things I picked up below are relatively minor rather than requiring fundamental redesign, but will if achieved please the majority. For those of you who frequent the bulletin boards you may well have seen some of these before but for those that don’t then hopefully they’ll add some food for thought, prompt discussion and hopefully some of those friendly people at Zopa can provide some feedback if possible, as well as likely delivery timescales if applicable:

• The Zopa Triangle - The (dead) zone where money disappears to from your holding account for an indeterminately long time when trying to lend to borrowers. Sometimes also known as Loans currently being processed – can we be provided with more information on this one area rather than just a top level amount?
• Remove all the scrollable boxes that are used in screens like “Offers to Borrowers” “Zopa Borrowers” etc. This is the 21st century - I have a 17 inch monitor I don’t need to only use 4 inches of it!
• Summary schedule of expected repayments due over the next 30 days and identifying where any bad debts may have arisen (are there any!?! ) A similar sort of thing is currently split out by lending offer but ideally an overall summary would be useful of payments received and expected.
• Electronic (automatic) withdrawal of money if required – currently contact with a person at Zopa is required. Automating would reduce the amount of human intervention required and therefore benefit Zopa’s costs, and please lenders!
• Lenders being able to sell their loans to other lenders on an exchange, for a rate agreed by both parties to allow lenders beset by unexpected issues to liquidate their loan portfolio

There’s so much other stuff which has been requested in one place or another. Above is hopefully a non-controversial snap-shot. I’ve pilfered the ideas from other people’s posts in the main so hopefully they don’t mind and I know Zopa have responded on at least the bottom one which is at least a year away – but at least they know about it!

I’m sure some of you will be cynical but a number of the requests that have been posted on the discussion boards have subsequently been implemented. Automated re-lending of a sort is now available, details regarding the expected returns on lending contracts etc. After all, the best way to eat the elephant standing in your path is to cut it up into little pieces.

So feel free to comment here or even better, come and join some of the other Zygotes, Zucchinis, Zebras and Zebedees (thanks Justin!) on the discussion boards.

Posted in Changes, Lenders, Guest blogger | No Comments »

Powerlenders are go!

Posted by Dave at 4:33 pm

We had a web site release yesterday - which I’ve said I won’t write about here any more (and talk about them on the discussion boards instead), but this was an important one.

For the first time at Zopa, it is possible to lend more than £25,000 to Zopa borrowers. This is a great thing - it means we can have larger lenders lending through Zopa, which means that more borrowers will get the loans they want - which has to be a good thing for all concerned.

It’s been a big job to get this live, and the reason why is principally to do with a piece of legislation known as the Consumer Credit Act (CCA).

Because people who lend more than £25,000 could be considered to be lending in the course of a business by the Office of Fair Trading (who are responsible for regulating unsecured lending in the UK), they need two things - 1) a consumer credit licence, and 2) to be lending in a way that is in line with the CCA.

The CCA sets out, in painful detail, exactly how a loan contract should be presented to borrowers, how both parties should sign it, and what document has to be available. It’s been designed with big banks in mind - where there is one lender and one borrower.

Zopa is of course slightly different. Lenders lend to at least 50 borrowers, in £10 contracts (£500 for CCA lenders, unless they ask us to change it). So a CCA lender (who are the only lenders who need to worry about this) can have hundreds of contracts to sign. Each one has be individually signed with a distinct action on the behalf of the lender (So a tick box that say’s “Sign all” won’t cut it), with it’s own time stamp. In additin, each contact has to be made available as a downloadable (and signable!) PDF document - all filled out with the amount of the contact, the lenders contact details (Their username, and Zopa’s Tipton address) and the time and date. Quite a task….

Anyway - after much work and input from just about everyone in the office (We’re an opinionated lot around here) we finally came up with a solution. It’s so clever, it’s patent pending, and because only CCA lenders will get to see it ‘in the wild’ I thought I’d show you a video of it here. (Can you tell we’ve got a YouTube account recently?)

(You can also download it here (Quicktime file) - slightly better quality than the YouTube version - and a snip at 9MB)

Besides this new signing screen, there has been a huge amount of work on the entire site to get this implemented, and I think it’s worth taking some time to thanks people individually - so here goes:

• Tim - for managing the whole process and getting it delivered on time
• Simon DJ - for legal input and creative thinking about how you sign contracts online
• Ian @ BJSS - for leading the team there who have created a technical wonder - we really have no idea how it actually works
• Sarah and Justin - for managing the design and usability work involved….with him being an Apple user is it any wonder we settled on 1 button?
• Damon and Dan @ Pynk & Fluffy - for the early Flash mock ups and working up endless prototypes
• Giles - for getting lenders to sign up to lend under the Zopa Powerlender scheme
• Thomas B and Tom E - for HTML, deployment skills under pressure and lots of copy
• Hilary, Ian and everyone else in Tipton - for testing the release over a hot and sweaty weekend, and making sure everything (pretty much) worked as it was supposed to
• James - for pushing the whole damn thing into motion in the first place

Thank you everyone!

Posted in New stuff, Lenders, Technology | 3 Comments »

Corporate Tax Rate for Personal Investment Returns

Posted by Simon DJ at 2:44 pm

Technology has empowered consumers to get a personal return on their spare cash by doing things for themselves that they once had to rely on corporations to do. While this allows the users of Zopa, eBay and other P2P services to escape the disadvantages of aging business models, these consumers tend to pay income tax on their returns at the top marginal rate, while a UK bank or retailer pays only 30% tax on the return it makes on the same activity.

Of course, it’s vitally important to encourage business endeavour, innovation and competition by offering tax breaks and other incentives to corporations (EU state subsidy rules permitting, of course). And it wouldn’t be necessary or practicable to increase the corporate tax rate for businesses already losing custom. But it does seem wrong to punish or disincentivise consumers who can simply do a better job for themselves than, say, corporate retailers or banks can do. A higher tax on consumers in this position amounts to a subsidy for paralysis, failure to innovate and limited competition.

Reducing the tax rates on personal investment returns may also stimulate more consumers to focus on saving, investing or simply going into “business”, albeit for themselves. SIPPS are an obvious step in the right direction, but one does wonder whether the Treasury can go further. Whether the decline (if any) in personal income tax collected would not be balanced by other benefits (monetary or otherwise) is something that should be explored.

Posted in Non Zopa, General, Lenders, Press, Members | 35 Comments »

Downloadable spreadsheets

Posted by Dave at 12:47 pm

There’s a debate started on the discussion board about spreadsheets to use with Zopa. I’ve uploaded a couple of ones we use internally that might help - why don’t you take a look and let me know (Here or there) whether they’re useful or not.

Posted in Lenders, Borrowers | No Comments »

Todays (small) changes

Posted by Dave at 12:25 pm

Nothing too exciting about todays release I’m afraid, but for the sake of completeness I feel I should write something!

The major improvement is for new members - we’ve changed the identification rules that we use when you join Zopa so that if you say you want to be a lender, you are far more likely to be able to complete your identification online. This is because Zopa lenders only need to pass money laundering regulations - which are far less strict than the id checks we need to complete for borrowers.

Up until now we did this offline the following day - now lenders can join Zopa in one seamless journey - and using the new functionality from a couple of weeks ago, they can lend the same day! (As long as they remember to transfer funds in afterwards from their bank of course.)

The other changes are behind the scenes stuff to make it easier for us to give you a better service.

Dontcha love that?

Posted in New stuff, General, Lenders | No Comments »

Up and running

Posted by Dave at 4:27 pm

Well, we’ve plugged everything back in again, turned it all on, and thankfully, it seems to be working! The site is back up and healthy - so what’s changed?

There are two major functionality improvements that will be most noticeable to members.

Firstly, you can now lend any amount you want to - from £10 to £25,000 - there’s no more £500 minimum! This means that if you want to try out Zopa with as little as £10 you can - although you’ll only be lending that £10 to one borrower - not 50. In fact, if you lend less than £500, you’ll be lending to less than 50 people, which slightly increases the risk that you won’t get your expected return (because you’re less diversified). On the other hand, it’s less money that you’re lending out. If you lend more than £500, your money will be diversified in the same way as before - over at least 50 borrowers.

Secondly, and more radically - you can now lend money that you don’t have at Zopa! Well, almost.

We’ve changed the system to allow lenders to make a lending offer of up to £25,000 before you transfer funds to Zopa - the offer will appear in your screens and you can amend the rates or withdraw - but it won’t be available to borrowers until you send in enough money to fully fund it. As soon as that happens, it will be placed in the market automatically, without you having to do a thing.

We’ve done this to make it easier to lend money at Zopa - you don’t have to wait for creaky old BACS to take 3 days to send your money and then come back to Zopa - you can do everything you need to do in one go. Also, it means that new lenders can really understand how Zopa works before sending in money, which hopefully will mean more of them do so!

Another thing we’ve enabled is that borrowers can now change their bank account details after they’ve set them up - we’ve a few borrowers for whom this has been an issue, and it’s going to make their (and our) lives a lot easier.

Finally, we’ve cleaned up the screen that shows your current lending offers - and replaced lots of links (withdraw, amend and lend more) with a little drop down menu to allow you to manage your offer much more simply.

Hope that is all useful - let us know in the comments what you think once you’ve had a play.

Posted in New stuff, Lenders, Borrowers | 5 Comments »

Invest ‘06

Posted by Dave at 12:51 pm

We went along to Invest 06 at the Business Design Centre last week - up in Islington, North London - to spread the Zopa word and get some cash in for our lovely borrowers.

You want proof? We got proof:

From left to right in the first picture, the people in the green are James, Dev, Chris, Rebecca, Des and Natalia - and Pardeep took the photo! The second one is Pardeep and the lovely Rebecca - you can work out who is who!

Posted in Lenders, Sales and marketing | No Comments »