Zopa Raises $106 Million as It Preps Bank Account Launch

British digital bank Zopa says it has raised 80 million pounds ($106 million) in new capital.

“We will use the funds to strengthen Zopa’s balance sheet without diluting shareholders as we prepare to enter everyday banking with the imminent launch of our flagship bank account,” the company said in a news release Wednesday (May 14).

“Having had a successful €80 million equity fundraise in November 2024, this non-dilutive capital strengthens our balance sheet and positions us firmly on the starting line for our bank account launch,” the release added.

The company said the new funding follows its recent announcement that it had doubled full-year profits before tax to 34.2 million pounds ($45.5 million) for 2024 on a 30.2% revenue jump. Zopa also teamed last year with British electricity supplier Octopus Energy to enter the U.K.’s 23 billion-pound renewable energy market, and with retailer John Lewis to offer personal loans to its 23 million customers.

Launched in 2020, Zopa says it has attracted 5.5 billion pounds ($7.3 billion) in deposits and has a little more than 3 billion pounds ($4 billion) in loans on its balance sheet.

Following last year’s funding round, PYMNTS noted some of the challenges facing Zopa and other so-called “challenger banks” as they rake in millions in funding.

“Investors are betting on these challengers to take share away from the incumbents that have long held sway over financial services,” PYMNTS wrote. “Without the brick-and-mortar locations that are the hallmarks of those marquee players, the competition boils down to rates offered on checking and savings accounts.”

For example, the British challenger bank Monzo’s interest APY on savings accounts is several times that of the national average, the report said.

There are also some signs, PYMNTS added, that challengers are still fine-tuning some parts of their business models amid these growth spurts. Fraud and anti-money laundering (AML) concerns are attracting increased regulatory scrutiny, particularly in the U.K.

More recently, PYMNTS noted the competition challenger banks face from a more traditional type of financial institution: the credit union.

“Perhaps the greatest advantage credit unions have is their continued emphasis on local roots and community trust,” that report said. “Their structure as member-owned cooperatives allows them to prioritize the needs of their members over shareholder profits, leading to more personalized service and a perception of greater alignment with customers’ values.”