Digital Bank Zopa Looks to M&As After $93M Fundraise

U.K. digital bank Zopa is looking to expand after raising $93 million in an equity round.

The funding, announced Thursday (Feb. 2) in a news release provided to PYMNTS, will be used to meet the bank’s capital requirements and support merger and acquisition (M&A) dealmaking.

“Today’s equity round reaffirms the support of our investors despite the challenging economic environment,” said Jaidev Janardana, Zopa’s CEO. “It is a clear validation of Zopa’s responsible, sustainable and profitable approach to lending, our strong unit economics, and our vision to build Britain’s best bank.”

He added that the bank enjoyed several profitable months in 2022 and will likely see full-year profitability in 2023, a first for Zopa.

“Few neobanks have attained the holy grail of profitability,” PYMNTS noted earlier this week after another U.K. digital bank, Monzo, moved closer to hitting that goal.

A report last May by Simon Kucher and Partners estimated that fewer than 5% of neobanks worldwide had broken even, “pointing to the growth-before-profit mentality that has reigned supreme in the space since the early days,” PYMNTS wrote.

Last year marked a turning point for the sector, as a number of digital banks began talking up profitability, Zopa among them.

In a speech at the Innovate Global Finance Summit in April of last year, Janardana said Zopa had profitability within just 21 months of attaining its U.K. banking license.

“Today’s news makes Zopa one of the fastest digital banks to achieve profitability ever and reinforces our thesis on the importance of sustainable growth as a catalyst for accelerated product and market expansion,” he said at the time.

The company marked another milestone last year when it reported that its deposits totaled more than £2 billion ($2.47 billion). In the news release Thursday, Zopa said that figure had reached £3 billion ($3.7 billion).

“With rising inflation, energy prices and rent increases adding considerable pressure on consumer finances, Zopa’s ambition is to make the billions in ‘zombie money’ sitting idle in U.K. current accounts work harder,” the bank said in August.

Zopa has been around since 2005, beginning life as a peer-to-peer lending service. It gained  prominence after raising $300 million at a $1 billion valuation in October 2021. Last year, it debuted a product to compete in the busy buy now, pay later (BNPL) space.

“[With this] option, we help solve the customer need, which is about compartmentalization of purchasing and paying down of debt, but at the same time, it doesn’t have some of the negative aspects that current versions of BNPL have,” Janardana said in an interview with PYMNTS following the launch.