P2P Lending Startups That Are Trying To Destroy The Banks

Business Insider: Challenger bank Metro Bank has just struck a deal with Zopa, one of the UK’s biggest peer-to-peer consumer lenders, to lend money over Zopa’s platform. The amount lent wasn’t disclosed but a source told Business Insider that it was around “millions a month”.

The pair signalled their ambition in the release announcing the deal, writing: “Zopa and Metro Bank believe this partnership is a great example of how disruptive financial challengers can collaborate to provide additional value and revolutionise the UK banking sector.”

Both companies want to not only steal market share from the UK’s traditional banks but also force them to reinvent their business by doing so. Management at both Metro Bank and Zopa have in the past said traditional banks do not to enough to cater to customers’ needs.

Metro Bank, known for its strong customer service focus, has in the past labelled the UK’s five dominant high street banks “a cartel” and Zopa’s boss Giles Andrews has chided banks for overlooking customers. Clearly these are two companies that aren’t just happy to work alongside traditional lenders.

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Bloomberg: Is peer-to-peer lending out of control? There’s certainly some cause for concern. Consider these facts: P2P loan volume is poised to hit $77 billion this year, a 15-fold increase from just three years ago. LendingClub, the No. 1 player worldwide, is trading at a market value of about $7 billion even though it lost $33 million last year. And in a flashback to the subprime mortgage boom, P2P startups have begun bundling and selling off loans through securitizations. The business of matching lenders with borrowers online—which still amounts to only 0.08 percent of the $96 trillion in global corporate and household outstanding debt—may truly be an innovative way to distribute capital. But is P2P a revolution or just another bubble?