Sunday, December 9, 2007

Zopa's Unveiling A Big Let Down

Everyone's commenting on Zopa's US launch, so I feel the need to get my two cents in. If you've somehow missed it, just skim the blog headlines:

For lenders, this is a huge non-event. You can invest your money in ... a CD. Zopa didn't want to loose that P2P street cred, so lenders can give up some of your 5.1% interest to help a borrower along.

It's very difficult to see Zopa's US offering as anything beyond a chewing gum, duck tape, and bailing wire operation. On the lender side, Zopa is competing with banks and will not attract big investment money. I think Lazy Man said it best:

So there is the rub. Investing in Zopa is very much like buying a bank CD. The only advantage vs a bank CD that I can see from a lending standpoint is that the lender can lend money to a specific borrower. This may be psychologically nice, but it’s never been the biggest selling point in peer-to-peer lending for me. If I really knew the person I was helping outside of Zopa that would be of value to me. However, helping a strangers is nothing new. Ten years ago when I bought a CD from my credit union, what do you think they did? They used that money to lend out to other people. I don’t see how this that different.

Zopa was supposed to bring some fresh competition to the US market and shake things up a little, but didn't bring much to the table. Lots of sizzle, but where's the steak?


RateLadder said...

why would I buy a CD from Zopa's credit unions and help total strangers, when I could buy a CD from my credit union and help people with which I work, live, or worship.

I need the possibility of higher returns, otherwise the current bank product lineup is adequate.

Personal Loan Portfolio said...

I agree that there is not much point for lenders, but there are some borrowers receiving a fantastic deal - effectively negative interest rates!

Jason said...

I never got into zopa, but lending club seems interesting. What do you think of them?