Zopa Case Study: How Zopa Is Creating a New Financial Services Exchange

Peer-to-Peer Lending and Borrowing for “Freeformers”

February 23, 2006

Zopa is a lending and borrowing exchange designed for freeformers—people who want to control their own lifestyles. These are people who do not value 9-to-5 jobs and who do not expect to retire on company retirement plans. Zopa is a new business designed specifically to meet their needs: a peer-to-peer exchange for borrowing and lending money. Here’s a description of what the Zopa team did to meet their target audiences’ key scenarios and to design their business once they clearly understood those scenarios.

Zopa is a U.K.-based peer-to-peer exchange for borrowing and lending money. Zopa challenges the financial services industry by providing an alternative, less expensive source of borrowing. For lenders, Zopa offers an interesting way to help others while making money.

Case Study Focus:

  1. How to spot a new customer segment and engage those customers in co-designing their own offerings.
  2. How to turn a customer need into an emarket whose products are supplied by customers to customers.

Target Customers:

Zopa is designed to meet the borrowing needs of “freeformers”--people who value control over their time and their money; people who have assets and incomes, but who do not necessarily work for a single employer.

Zopa is also designed to meet the investment needs of freeformers who want a good financial return on their money and, at the same time, to help others improve their lifestyles and realize their dreams.

Customers’ Issues:

Freeformers hate borrowing from banks. They don’t like high-interest credit cards. They resent being rejected for credit because they have chosen unconventional lifestyles.

Freeformers want control over the money they invest. They want to know what rate they’ll receive and how their money is being used.

Customers’ Results:

Borrowers with unconventional lifestyles can get loans from Zopa. Their loans are several percentage points below the rates charged by banks or credit cards.

Lenders receive higher interest rates than a bank savings account, a money market fund, or a municipal bond, but with a more predictable return than they would receive from investing in equities.

Business Results:

Within nine months, and with very little marketing, Zopa attracted 45,000 members, with an average of £2 million available for borrowing on any day.

Loans arranged by Zopa were increasing by 80 percent month-on-month--with more than £500,000 of loans arranged in December 2005--and not a single borrower had missed a single payment.

Roles that Customers Play in Co-Designing Zopa:

  • Customizers--They’re configuring their own products
  • Co-Designers--Lead customers have been involved in co-designing Zopa’s Exchange
  • Market Makers--They’re co-evolving a financial exchange
  • Change Agents--They’re changing the financial services industry’s business model


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