A Briefing on Zopa Filene i 3 Meeting Kansas City, MO April 20, 2006.
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Transcript of A Briefing on Zopa Filene i 3 Meeting Kansas City, MO April 20, 2006.
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A Briefing on Zopa Filene i3 MeetingKansas City, MOApril 20, 2006
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Today’s talk
• About Zopa• UK experience so far• US opportunity• Outlook
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The big idea
We are trying to innovate in consumer finance so consumers get a better deal, safely.
We see innovative credit unions as our natural partners.
Don’t be shy!
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How Zopa startedTaking fear--and cost--out of consumer finance
• The world’s largest pure online bank
– Immediate best-rate provider of savings accounts & mortgage loans
• The world’s first online person-to-person lending exchange
– Lowest-cost personal loans in the UK
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How Zopa works
BorrowersLenders
Lenders and borrowers matched by our engineAll loans diversified across 50 borrowers
No subprime lending1% fee on loan volume
A
B
market
Sorted into “markets” based on credit
Pick a loan term and amount
4.9%
7.9%
average UK APR 4/15/06
4.5%
5.3%
Set amount and rate each is willing to lend at in each market
Credit screen
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What Zopa members say
• Our members say they’re getting a great deal
– Great rates
– Flexible, convenient terms
– No traps, not designed to confuse
• Our members say they like the community feeling
– Socially rewarding: dealing directly with other people
– More tangible: no faceless institutions
70,000
60,000
10,000
50,000
40,000
30,000
20,000
membership growth
Jul Aug Sep Oct Nov Dec Jan06 Feb Mar
9%
Compounded monthly
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UK pricing
• Lenders:– Average gross return (before
bad debt) of 7%– 55% higher than best savings
account alternatives
• Borrowers:– Lowest-cost personal loans in
the UK• Members with top credit
can borrow up to £25,000 for three years at 5%
– No prepayment penalty
All rates are %APR typical, 3/9/06Source: Bank websites, Zopa
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UK debt performance Risk controls working well to date
Cumulative bad debt (arrears + writeoffs) was 0.05% of cumulative loan volume in January 2006. We expect future loss rates to be higher but under control nonetheless.
0.10%
0.20%
AprM
ay Jun
Jul
AugSep Oct
NovDec
Jan ‘0
6Feb
Source: Zopa
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Reception in the UK
Alas, the banks … have an iron grip over lending to individuals in the UK, and that will never change, right? Wrong - and to prove it, I [became] a member of Zopa...“How I Opened My Own Bank” - The Motley Fool - April 06
Lending through Zopa is becoming an important part of many people's portfolio, alongside their savings and investments…“Show Me the Returns” - Alpesh Patel - March 06
This eBay-style loan exchange body has loans at a table-topping 5.3% APR.“Get the Cheapest Loan on a Plate” - The Guardian - February 06
“
“
“
”
”
”
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Our targeted US consumersWhere our brand will reach out the most aggressively
• Profile– 21-44 yrs old– College-educated– FICO > 650– Urban and suburban– Household income > $60k
• Attitudes– Banks offer self-serving complexity– Very mistrustful of financial institutions– Frequently angry– See nobody as as unbiased
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0% target penetration by city
Source: ZopaCity A City B
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Opportunity in the US
0% 2% 4% 6% 8% 10% 12%
Returns for US investors, April 2006
Treasuries (3yr)Low Risk
Saving /MMA
High Risk
A-Rated Corporate Bond
CD’s
Stocks
B-Rated Corporate Bond
Corporate Bond Fund, Lower Quality
REITs
Sources: Mornginstar, Zopa analysis, Yahoo! Finance, Bankrate, AMEX, as of 4/4-4/7/06. Returns median rates, pretax, and net annual expenses.
Rates paid by US borrowers, April 2006
4.7%
3.9%
6.5%
6.7%
6.4%
7.2%
11.0%
26%
11.0%
18.4%
11.5%
9.6%
9.1%
20.0%
21.0%
32%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Student Loan (Alltypes)
CU Auto Loan,Used Car (3yr)
Auto Loan, UsedCar (3yr)
HELOC ($30k,FICO>660,
Normal LTV)
Home Equity Loan($30k)
Credit Card (Fixedstandard)
Personal Loan
Payday Loan(2wk, $500)
Annual Rate (Before Fees)
450% 800%
465% 650%
Sources: Bankrate (4/17/06) and Consumer Federation of America (11/040
Typical
Zopa rates in the US should clear at 7-8% on average.
This saves borrowers money and gives investors a new asset class.
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Moving down the long tail
Today…
Tomorrow…
Lenders who can’t lend to other people
Borrowers who are mispriced
– FICO, etc.– Analytics
– New data types– Attitudes – Group membership & behavior
Credit Filtering
Cumulative Population
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Zopa 2.0
• Social markets:– Tenants of the Notting Hill
Housing Trust – “Key workers”– Recent graduates
• Affinity markets– Lenders and borrowers
choose for affinity as well as financial reasons
• Small business lending
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Partners in the UK
Integrated partnerships
Tactics deployed: – media (banners, text links, etc.)– best buy table inclusion– editorial support– promotions / competitions– email – co-branded landing pages– joint PR and surveys– data sharing