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Zopa and securitisation

Today’s announcement of the first ever securitisation of loans originated through the Zopa platform is great news for everyone involved with Zopa. It is a key milestone in our growth and a reflection of the maturity of our business. I wanted to share my thoughts on the journey we took to this important milestone.

We can stand up to scrutiny

By embarking on this process we opened up our platform, processes and our data to an intense level of scrutiny by investors and ratings agencies.

They pored over our performance and processes, with the highest ratings ever for a debut securitisation of loans originated through a peer-to-peer platform globally, a testament that Zopa stands out in its risk management processes, underwriting and servicing practices, and track record. The senior bonds received an Aa3 rating from Moody’s and an AA- from Fitch, which wrote in its report that the “’AAsf’ cap is the highest assigned to a marketplace lending transaction globally by Fitch to date”.

You can read more about how we assess risk in our series of blog posts.

Retail investors should derive confidence from this assessment, which validates the robustness of the Zopa platform.

Our lending mix has evolved with our business

Over the last two years, we have been able to offer Zopa loans to a wider group of customers. From 2014 we introduced D and E market borrowers, first to institutions and then, when we were comfortable with their performance, to all of our investors. You can read more about our different risk markets and below is an illustration of how we have expanded our lending to include a greater range of risk markets:

Whilst this shows a percentage increase of more risky markets, in pound terms, as you can see below, we still overwhelmingly lend to our A to C markets, which comprise of the least risky borrowers. It’s our increase in A-C markets that has driven Zopa’s growth and we intend to continue to focus on it.

Looking forward

Today’s issuance marks the creation of many possibilities for Zopa and its growth. We remain committed to originating great quality loans and making the Zopa investment asset a distinctive and attractive one to retail and institutional investors alike. We will continue to treat both types of investors equally by randomly allocating loans, and are firmly opposed to institutions being able to cherrypick their loans or to any other practices that mean they aren’t on an equal footing to retail investors.

We already adhere to standards of data transparency that are unheard of in the world of traditional finance, and we will continue to ensure that all our lenders have this visibility on the asset they are investing in. The additional scrutiny from institutional investors is something we welcome.

Securitisation has opened up new funding sources that will allow us to explore new ways of growing the platform; it will allow us to bring our market-leading loans to more people and continue to deliver consistent returns to all of our investors. It is a great milestone in our journey and another big step towards our ultimate goal of building a transparent and fairer financial future for our customers.

Jonathan Kramer is Head of Capital Markets at Zopa