Peer-to-peer (P2P) lender Zopa will secure a £130 million ($1.67 million USD) investment that it needs to become a challenger bank. The news comes days before its conditional banking license is set to expire on Tuesday (Dec. 3). A source told the Financial Times that Zopa will receive the funds from an entity linked to IAG Capital Partners, a U.S.-based fund, and its U.K. investment vehicle Silverstripe.
Launched in 2005, Zopa is considered one of the world’s first P2P lenders, lending almost £4 billion to consumers in the U.K. since its inception. In December 2018, it became the first P2P lender to be granted a conditional banking license by the Financial Conduct Authority (FCA), with plans for its digital bank offering to include a fixed-term savings product, a credit card and a money management app. It was given a year to raise regulatory capital, and prove it was financially strong enough to become a bank.
Zopa raised £60 million from new and existing investors in two funding rounds since applying for the banking license in 2016, and hired a number of former banking executives to create a new bank board.
“Acquiring our banking license is the starting point for Zopa to become a major force in retail banking,” said Jaidev Janardana, Zopa’s chief executive, in a statement last year.
The move into digital banking would come as the FCA has reportedly been taking a closer look at P2P lenders, as well as proposing tougher regulations for the industry as a whole.
“We believe that loan-based crowdfunding can play a valuable role in providing finance to small businesses and individuals, but it’s essential that regulation stays up to date as markets develop,” said Christopher Woolard, executive director of strategy and competition at the FCA, last year. “The changes we’re proposing are about ensuring sustainable development of the market, and appropriate consumer protections.”