Business 2.0...Big Innovations: Zopa - Sep. 20, 2006:
"The Innovation: Peer-to-peer lending
The Disrupted: Traditional banks
Any industry making a huge profit margin off its customers is a good candidate for disruption. Banking is a classic case -- just think of the 19 percent interest you pay on credit cards and the 2 percent you earn on your savings account.
Zopa is closing that gap by using the Web to allow personal lending on a massive scale. The startup was the first company to introduce peer-to-peer lending in the United Kingdom 18 months ago and is about to launch in America. 'What Skype did to telecoms, this could do to banks,' says David Cowan of Bessemer Venture Partners, which contributed some of the $31 million in funding the startup has attracted to date.
Scott Anthony, a managing director of Clayton Christensen's consulting firm, Innosight, is intrigued by the disruptive potential of peer-to-peer lending. 'Are there ways to loan amounts that banks won't lend because they're too small,' he asks, 'or to serve customers who would otherwise never be served?'
The idea is simple. People join Zopa online as either borrowers or lenders. The lenders proffer money not to individuals but to a pool of people grouped together because of similar creditworthiness. Zopa assesses the credit risk of the borrowers, pools the capital, and matches consumers who need money with consumers who want to lend it. Since Zopa is not technically a bank and doesn't lend money itself, the capital requirements to run the business are relatively small."