Peer-to-peer lender Zopa is now profitable - a year ahead of schedule
CEO Jaidev Janardana announced in a speech at marketplace lending conference LendIt Europe in London on Tuesday that the platform turned a profit in September.
Janardana told the audience: "At the beginning, we said these are uncertain times, let's bring forward our plans for breakeven at the backend of 2017 to now, 2016. I'm proud to say that we were profitable in September and we'll be profitable moving forward. That's a big change for us in terms of proving scalability."
Peer-to-peer lenders, also known as marketplace lenders, are online platforms that let people invest in individuals or companies by lending money to them directly. Zopa, founded in 2005, lets people lend to consumers and is credited with inventing the peer-to-peer concept.
The platform has lent over £1.75 billion ($2.14 billion) across its website since inception but, as Business Insider pointed out earlier this year, has only made a combined profit of just under £60,000 in the 11 years it has operated. In that time it has made a collective loss of over £20 million.
Recent accounts show Zopa lost £8.9 million last year, a 45% increase on the loss it made in 2014.
The "uncertain times" Janardana referred to in his speech reflect a number of problems facing the marketplace lending industry and the wider economy.
LendingClub, the leading marketplace lender in the US, was caught up in a lending scandal earlier this year that forced out its founder and CEO. The debacle has spooked the wider industry, while headlines about risks, and Brexit haven't helped either.
Janardana made the comment about Zopa's profitability while highlighting the fact lending volumes slowed for both US and UK platforms at the start of the year, as shown by this slide:
"First, particularly for the UK platforms, we consciously chose to move away from optimising for growth and instead optimising for profitability," he said.
"In the US what happened is effectively a reduction of liquidity. I think that was a good learning for some people."
P2PGI, a platform that invests in marketplace loans, last month led the first UK securitization of peer-to-peer loans, made up of Zopa loans (securitization is where the cashflow from loan repayments are packaged up and sold on.)
Ratings agency Fitch concluded during its rating of the product that Zopa fueled its growth over the last 3 year by making riskier loans.