CASE
STUDY WWW.ZOPA.COM
ON
BY
PRASHANT SINGH
(www.enter10me.in)
Table Of Contents
1. Introduction ------------------------------------------------------------------------------------------- 2
2. Business Model -------------------------------------------------------------------------------------- 2
3. Customer Value Proposition --------------------------------------------------------------------- 3
4. Revenue Model -------------------------------------------------------------------------------------- 4
5. Target Market Place -------------------------------------------------------------------------------- 5
6. Main Market Competetors ----------------------------------------------------------------------- 5
7. Comparative Advantages -------------------------------------------------------------------------- 6
8. Marketing Strategies ------------------------------------------------------------------------------- 6
9. Conclusion And Findings --------------------------------------------------------------------------- 6
10. Appendices -------------------------------------------------------------------------------------------- 7
11. About Zopa Team ----------------------------------------------------------------------------------- 11
12. References -------------------------------------------------------------------------------------------- 12
1. Introduction
Zopa.com is an online brokerage or money exchange service launched in year 2005, allowing
people to lend and borrow money. The name Zopa stands for “Zone-Of-Possible-Agreement”
which identifies the bounds within with agreement can be made between the two parties. It is
basically a P2P i.e. Peer-To-Peer lending company, where Zopa acts as a middle man in
facilitating the loans or money transactions process between two or more parties. It’s a British
Company, based in London and is backed by Benchmark Capital and Wellington Partners. It
operates within the United Kingdom, Italy, United States and Japan. Zopa has developed a value
innovation in the financial services industry.
2. Business Model
Zopa.com is a new e-business model based which is based on C2C (Consumer-To-Consumer)
business model where borrowers borrow money from lenders at interest rate decided by the
lenders who receive the interest. It allows people who want to lend their money to be matched
with those who want to borrow. Zopa charges a nominal fee out of the borrower’s loan amount
and lenders amount. It acts as a middle-man between the two parties. It targets customers who
are sick of banks. Zopa uses the credit reference agencies Callcredit and Equifax to check
borrowers’ credentials, to prevent people with bad credit history and to avoid problems between
lenders and bad debtors. The Business model is shown in Exhibit 2(Appendices – [a].I).
One downside to Zopa’s business model is that it does not have a contact Centre.
People join Zopa online either as borrower or lender. They have to register with the Zopa, once
registered; lenders could lend money to a pool of the lenders grouped together because of similar
credits and desired term for loan. Zopa assesses the credibility of the borrowers through credit-
reference agencies based ratings. The method of assessing is similar to those of U.K. retail banks
and other lenders. Services is offered to only those who has attained a credit rating of A*-, A-, B-
or C-. The company also checks and verifies for identities of all lenders and borrowers by the
help of the identity checking agency. Again, the ability of each borrower to repay is checked
individually by the company’s own team of underwriters. Then the borrowers are provided
1. Zopa verifies the credit of people looking to borrow and divides them into different
categories like A*, A, B or C. It looks at the credit of the people wanting to borrow
money and rate them as A*, A, B or C borrower. If they are not eligible for this or do not
fulfill Zopa’s criteria then they are not lent money.
2. Lenders are the people who are willing to make lending offers to the borrowers for a
period of time at interest rates decided by them.
3. Borrowers review the interest rates offered to them by the lenders and accept those they
are interested in. Borrowers can refuse the rates and can again come back to check for the
rates if they have changed.
4. Zopa reduces risk through lending only chunks of money to the individual borrowers as
shown in Exhibit 1(Appendices – [a].I). If a lender is lending large sum of money, then
his money is divided or spread among multiple borrowers i.e. if a lender is willing to lend
amount greater than £500 then the amount would be spread across at least 50 borrowers.
5. There is a legal binding contract between the borrowers and the lenders during the
process.
6. The Borrowers return or repay the amount monthly by direct debit. In case of defaults in
a repayment, recovery is done with the help of a collections agency that uses the similar
recovery process that is used by the high street banks.
7. Zopa charges fees to both Lenders and Borrowers. The borrower is charged a fixed fee
of £124.50 for each loan (whether from Markets or Listings) by Zopa. Before 6 April
2010, this fee was £118.50 and before 5 April 2008 the fee was a variable 0.5% of the
loan amount. Currently new lenders have to pay an annual fee of 1% of the amount lent
and this fee amount is deducted from the Lender’s account. For lenders who joined
before August 2008, the Lender fee was little less at rate of 0.5%.
8. Zopa also pays the Lenders interest on the balance amount in their holding accounts. The
holding account interest rate has been equal to the base rate of the “Bank of England” i.e.
equal to 0.75% and the interest is paid each month.
9. Zopa currently offers Category A borrowers a sum of £1000 at the interest rate of 5.5 per
cent, £3,000 at 5.9 per cent, £5,000 at the interest rate of 6.2 per cent.
10. Zopa provides loan amount from £2,000 to £15,000.
11. Lender can lend from £10 to upwards (maximum) of £25,000.
12. Zopa anticipates that a return of 6 per cent to 9per cent is returned to the lenders. The
Lenders can receive their monthly payments either as income or choose to have the
income rolled up and lent to other borrowers.
13. Zopa also earns money through selling payment protection insurance to the borrowers
who want it and through referring people who could not borrow at Zopa (due to bad
credit rating) to other loan providers.
The company also has a good customer insight which enabled them to structure the business and
services of the business accordingly. Also Zopa had a good demand analysis which showed the
trends & current levels at which their products can be used. Zopa estimated that there are nearly
six million “freeformers” in the United Kingdom and thirty to forty million in United States.
Also the research by the company showed that this number is increasing.
But the company does not focus in the area of conversion marketing. The company had nearly
26,000 customers after four months. If the numbers of potential customers are correct, that is
nearly one-third of a percent of their current target market. Since these numbers are only focused
on the United Kingdom and the United States, the market can be supposed to be quite much
larger for the company as the company is also focusing on Italy and japan.
7. Comparative Advantages
There are many advantages of Zopa over its competitors.
It has a solid management team that seems to work together well and has proved to work
well together in the past.
The revenue earning layout or plan of the company is also effective.
8. Marketing Strategies
Zopa has a unique/different marketing strategy than the most of other online companies.
Zopa has putt effort on the “word-of-mouth and PR with some online marketing
activities”, while it has put no much effort toward “offline media”, such as magazines,
billboards and TV’s.
Another important strategy is that Zopa uses Search-Engine-Marketing as its main online
marketing activity. This is one of the important steps by Zopa, but it needs certain
improvements.
However, there are some weaknesses to this strategy as well. Zopa has only small room for its
growth as the market is small and limited, it must focus on name recognition as it has just passed
through the introductory stage.
- Zopa has accurately identified its target market, and done some excellent research in
focusing on their target market trend.
- Zopa can create a broader range of personas as well as it can expand its areas of
advertising campaigns.
- It uses idea of conversion marketing to convert freeformers from just wondering at their
site to actually invest in it.
ii. Exhibit 2
Board of Directors
Chairman
- Philip j. Riese
Non-executive Directors
Executive Director
Partners Companies
- Bessemer Venture Partners
- Balderton Capital
- Wellington Partners
- Tim Draper
- The Rowland family
2. www.wikipedia.org
3. http://www.telegraph.co.uk
4. www.zopa.com