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2010 Trends

Our friends at P2P-Banking.com have posted an interesting review of P2P lending here and I thought I would give a personal opinion on the questions they ask:

1. Will there be more competition from new entrants in countries where there is a P2P lender and why isn’t there a competitor to Zopa in the UK? I think there will where regulation permits, and I’m not sure why we don’t have a competitor in the UK yet. It’s also not quite true as www.bigcarrots.com launched at the end of last year for business lending but it’s early days for them. My guess is that it probably looks quite hard work, given that we launched almost 5 years ago. The UK tax regime also isn’t favourable to P2P lending vs the banks, although we are working hard on that. I think things will change somewhat as and when we are able to announce profitability…..Or is it just because we are doing such a good job no one wants to compete with us? Would be very interested in others’ views! 2. Will P2P lenders offer a wider variety of products? Possibly, but the unsecured lending market is gigantic in the UK and other countries, so certainly represents a sufficient opportunity to build a decent business. Furthermore there is a real benefit is specialisation when competing with incumbent banks as it allows us to be much more fleet of foot. 3. Will a bank acquire a P2P lender or at least a share in one? I don’t know, it’s not something we are pursuing! 4. Will an established P2P lender fail? Probably, and I have my own view as to which one(s), but it won’t be us! 5. Will there be cross-market lending? I don’t think so for some considerable time as regulations are too different. 6. Will social-network data be used in credit assessment? It would be interesting and of course we are investigating, but I don’t agree with the assertion that using conventional data necessarily leads to higher than expected losses, or at least it doesn’t at Zopa where we are proud of our risk performance and believe it is central to the success of our business. Other P2P lenders can’t always say the same thing….